Buy HDFC Bank; target of Rs 2074: LKP Research

LKP Research's research report on HDFC Bank

HDFC Bank reported mixed operating performance in 1QFY24. Slippages increased 18% sequentially and GNPA at 1.17% is below the historical trend of 1.4%. In 1QFY24, the provisioning expenses were higher sequentially at ₹28.6bn (v/s ₹26.8bn 4QFY23). At the same time NII growth was tepid sequentially (21.1% YoY, 1.1% QoQ) against the loan growth (15.8% YoY, 0.9% QoQ). The bank reported stable NIMs at 4.3%. A marginally higher opex (C/I ratio: 42.8% v/s 42%) and lackluster NII growth led to sequential decline in PPOP. Thus, the bank has reported sequential decrease in PAT by 0.8% along with ROA/ROE of 2.04%/16.3%.

Outlook

We expect marginal reduction in ROA/ROE for FY24E owing to higher C/I ratio and margin pressure. We believe, superior underwriting practices, higher liquidity, adequate coverage and strong capital position makes HDFC Bank well placed and thus, we re-iterate BUY with price target of ₹2,074.