Buy HDFC Bank; target of Rs 2070: Motilal Oswal

Motilal Oswal's research report on HDFC Bank

HDFCB reported a steady quarter with 30% YoY growth in PAT (8% beat). This was supported by lower provisions and higher ‘other income’. NII grew 21% YoY, while PPoP grew 22% YoY to INR187.7b (in line). Loan growth was driven by strong traction in Commercial and Rural Banking and a sequential pick-up in retail. Deposits registered a modest growth of 1.6% QoQ. Asset quality ratios remained broadly stable as slippages increased to INR58b. The restructured book declined to 27bp of loans (vs. 31bp in 4QFY23). PCR declined 81bp QoQ to 74.9%. We introduce forecasts for the merged entity and estimate the bank to deliver net earnings of INR654b/798b/957b over FY24-26, translating into RoA of 1.9-2.1%. We reiterate our BUY rating on the stock.

Outlook

We reiterate our BUY rating with a TP of INR2,070 (premised on 2.8x FY’25E ABV + INR211 for subs).