Buy HDFC Bank; target of Rs 2310: Prabhudas Lilladher

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Prabhudas Lilladher's research report on HDFC Bank

HDFCB earnings of Rs50.05bn (PLe: Rs49.99bn) were in-line with estimates with slightly higher provisions which offset the beat in top line and continued cost control. Loan growth was strong 24% YoY with this quarter being led by wholesale, while margins saw uptick of 10bps to 4.3% on benefit from capital raise. Bank has continued to gain market share in key businesses led by digital sourcing and deeper penetration improving product delivery and cost control which has led the bank to reach historic low C/I of 39.9% in Q2FY19. Asset quality was steady, while the bank did not clarify on whether it has exposure to IL&FS but we do not expect large risk. We continue to remain positive on back on its consistent delivery of 20% CAGR earnings, strong loan growth, steady liability franchise and strong capital position.

Outlook

Retain BUY with revised TP of Rs2,310 (from Rs2,492) based on 3.6x (from 4.2x) Sep-20 ABV as we raise CoE assumptions and also roll over from Mar-20 ABV.

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