Buy HDFC Bank; target of Rs 2000: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Bank

HDFCB saw the best ever quarter after announcement of the merger as (1) deposit accretion was strong while loan growth was controlled, improving LDR (2) NIM slightly enhanced QoQ to 3.63% despite of a sharp fall in LDR QoQ indicating a preference towards pricing over growth and (3) balance sheet was further fortified by creation of floating provisions. Adjusting for one-time ex-gratia of Rs15bn, core PPoP beat PLe by 3.7% led by better fee income and controlled opex. Credila stake sale gains of Rs73.4bn and tax write-back of Rs38.2bn were utilized to create floating provisions of Rs109bn. Contingent and floating provisions as at FY24 end stood at 110bps of net loans which is best-in-class and comparable to ICICIB (109bps).

Outlook

We expect a loan/deposit CAGR of 12%/17% over FY24-26E which would bring down the LDR to 96% by FY26 end (FY24 104%). Tweaking the multiple to 2.6x and rolling forward to Mar’26 core ABV, we maintain TP at Rs2,000. Retain ‘BUY’.

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HDFC Bank - 22042024 - prabhu