Buy HDFC Bank; target of Rs 1,260: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's report on HDFC BankIn another steady state quarterly earnings, HDFC Bank reported in-line net profit of Rs 28.7 bn growing 20.5% Y-o-Y supported by strong NII growth and healthy non interest income. Key highlights: 1) NII grew by 21.2% Y-o-Y on the back of healthy loan expansion. Margins reported a decline of tad 10 bps Q-o-Q at 4.2% primarily due to the reduction in base rates and rapid fixed deposits expansion during the quarter 2) Non-interest income turned out to be healthy; up 24.7% Y-o-Y, 3.6% Q-o-Q attributable to increased core fee (21.6% y/y; 9.1% q/q) and forex income (44.2% y/y; flattish q/q) 3) Opex spiked 19.8% Y-o-Y, 4.7% Q-o-Q due to continued branch expansion (added 126 branches) during the quarter. 4) Asset quality improved during the quarter with GNPA and NNPA ratios at 0.91% and 0.25% respectively. Provisions stood on the higher side; up 49.4% Y-o-Y due to increased specific and floating provisions. 5) CASA ratio stood at 39.7%; however, exceeding CASA growth, term deposits grew at a higher pace; up 37.6% Y-o-Y 6) Advances and deposits grew healthy by 27.9% and 29.7% Y-o-Y respectively.Valuation & Recommendation: Defying the macro challenges, HDFC Bank continues to report staunch retail loan growth, above industry loan growth, healthy fee income and steady credit costs which reinforces our belief in its sustainable earnings. Besides we expect the asset quality to remain stable and margins improvement stand round the corner with least impact coming from the new base rate calculations based out off marginal costs of funds. Against this backdrop, we have marginally tweaked our growth estimates and subsequently raise our target price to Rs 1,260 (earlier Rs 1,200) valuing the bank at 3.8x P/ABV FY17E. Currently, the stock trades at 3.3x P/ABV FY17E, says KRChoksey research report.For all recommendations, 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.

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