Arihant Capital recommended hold rating on HDFC Bank with a target price of Rs 2315 in its research report dated January 21, 2019.
Arihant Capital's research report on HDFC Bank
HDFC Bank reported strong set of numbers in Q3FY19. (a) Profitability growth of 20% YoY at Rs. 5586 cr despite higher provision (including contingent provision of Rs. 322 cr) made during the quarter supported by higher core fee income of 27% at Rs. 3647 cr. (b) Bank’s total advances as on December, 2018 stood at Rs. 780,951 cr, registering a growth of 24% YoY which led to 22% growth in NII at Rs. 12577 cr. while margins remained stable at 4.3%. The domestic loan mix between retail to wholesale composition stood flat at 55:45 QoQ. (c) Operating performance of the bank remained healthy. Operating profit for the quarter grew by 28% at Rs. 10778 cr while OPEX grew by 17%. Cost-income ratio improved by 150bps QoQ to 38.4%. (d) Deposits growth of 22% YoY was largely supported by growth in term deposits at 29% YoY while CASA growth was slower at 13% YoY. CASA ratio for the quarter reduced to 40.71% vs 41.96% in Q2FY19.
Outlook
We have valued the stock on P/ABV of 4.6(x) to its FY20E ABV of Rs 503 per share and arrived at a fair value of Rs. 2315. We have ‘HOLD’ rating on the stock.
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