Buy HDFC; target of Rs 2228: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC

HDFC's NII growth of 12.6% YoY was slower than expectations on slightly higher interest cost and opex. Loan growth came at 18% YoY (21% YoY incl. loans sold) with individual loans continuing to lead growth. Spreads also remained stable at 229bps but cost pressures have moved up and hence HDFC has increased PLR by 20bps effective 1st Apr'18 which will keep spreads steady. Management expects loan growth to be at 17-18% YoY, with similar growth in non-individual book. Loan growth momentum has improved and with stable spreads and hence, core operations is likely to remain upbeat.

Outlook

We have largely retained our estimates and revised our TP to Rs2,228 (up from 2,222) as we roll over to Mar-20. We have already factored Rs50bn warrant conversion in our estimates base for FY19.