Buy HDFC Bank; target of Rs 2500: Motilal Oswal

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Motilal Oswal's research report on HDFC Bank

Healthy loan growth and improved other income helped HDFCB to report strong 3QFY19 PAT of INR55.9b (20% YoY) in line with our estimates. NII grew by 22% YoY to INR125.7b (in line) while margins were stable at 4.3%. Over 9MFY19, PPoP grew by 21.5% while PAT grew by 19.7%. Core fee income grew by 27% YoY to INR36.5b led by healthy payments/cash management fees. Treasury gain of INR4.74b v/s loss of INR0.33b in 2QFY19 boosted other income growth by 27% YOY to INR49.2b. Opex grew 17% YoY/7% QoQ (higher than estimate by 5%) and resulted in PPoP growth of 27.5% YoY (26% YoY growth in core PPoP). Cost-income ratio improved 150bp QoQ to 38.4% (40bp improvement in core cost-income ratio).

Outlook

We maintain our Buy rating with TP of INR2,500 (3.7x Sep-20E ABV of the bank).

For all recommendations report, click here

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