Buy HDFC Bank; target of Rs 2454: Edelweiss

Edelweiss' research report on HDFC Bank

HDFC Bank’s Q4FY18 earnings sustained 20% YoY growth momentum but core operating profit growth was softer—up <25% versus 30% plus over the past couple of quarters. The miss was due to sharp moderation in loan growth (sub-20% YoY); surprising given better market opportunities in corporate segment (PSU fallout). Meanwhile, deposits grew a strong 13% QoQ, which along with capital raising will provide growth runway to the bank.

Outlook

Best-in-class liability franchise, expansion of rural/semi-urban branches and improvement in productivity owing to digital focus will ensure the bank delivers above-industry earnings growth—>25% CAGR over FY18-20E—and sustains superior return ratios (RoA of 2%). We maintain ‘BUY/SO’ with TP of INR2,454 (at 4x FY20E P/ABV). For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.