Buy HDFC; target of Rs 2266: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC

While the knowns in the form of higher base (listing gains from insurance biz:Q3FY18 & likewise from AMC listing: Q2FY19) dragged HDFC's PAT to Rs 21bn (PLe: 26bn), the miss came on account of lower than anticipated growth and elevated GNPAs (non-individual side). Subsequently, PPoP took a beating de-growing 61% YoY, however, low provisioning requirement supported the bottom-line. Loan growth of 17% YoY in individual loan book stood decent, but non-individual side slowed down for the quarter. Slight moderation in spreads both on individual and non-individual book as Q3 proves to be a dampener, reported NIMs stood healthy at 3.5% up from 3.3% a quarter ago given the timely PLR hikes. Incorporating market apprehensions, we envisage 16% loan growth for FY19 and 17-18% over FY20-21E, we tweak our credit costs and GNPA estimates moderately higher as we stand wary of the non-individual portfolio. These should have a bearing on RoAs and we reckon the same should move in the range of 2.2-2.3% over next two years. While superior track record and resilient balance sheet prompt us to reiterate BUY, we closely monitor the du-pont metrics for the non-individual business.

Outlook

Our TP at Rs2,266 based on SOTP metrics values HDFC at 2.7x at Sep-21 PABV.