Buy HDFC Bank; target of Rs 2060: KR Choksey

KR Choksey's research report on HDFC Bank

Net Interest Income (NII) for Q2FY24 stood at INR 2,73,852 Mn, a growth of 30.3% YoY/ 16.0% QoQ Pre-Provision Operating Profits (PPOP) grew 30.5% YoY/ 20.9% QoQ to INR 2,26,939 Mn. The non-interest income for the quarter stood at INR 1,07,078 Mn, a growth of 16.0% QoQ/ 41.0% YoY. Net profit for Q2FY24 stood at INR 1,59,761 Mn, a jump of +50.6% YoY/ 33.7% QoQ. As of September 30, 2023, advances were reported at INR 2,33,12,329 Mn, a growth of 57.5% YoY/ 44.3% QoQ. The deposit grew by 29.8% YoY/ 13.6% QoQ at INR 2,17,28,578 Mn, with the CASA ratio at 37.6% as against 45.4% a year ago. HDFCB reported its GNPAs at 1.34% as of September 30, 2023, compared with 1.23% as of September 30, 2022 (vs 1.41% as of June 30, 2023, on a proforma merged basis). The NNPAs for the quarter ended stood at 0.35% vs 0.33% of the net advances as of September 30, 2022. Capital Adequacy Ratio (CAR) stood at 19.5%. CET-1 ratio stood at 17.8% as of September 30, 2023.

Outlook

We value the bank's standalone business at 2.8x FY25E P/ABV to INR 1,857 and the subsidiaries at INR 203, taking the total value to INR 2,060 (unchanged), implying an upside of 33.7% from the current price. Accordingly, we maintain a "BUY" rating on the shares of HDFC Bank Ltd.