SMC Global Institutional Equities
HDFC Bank Ltd
Link To Report:
Result Update: Q3 FY20
CMP: INR 1,278
Target Price: INR 1,475
Up Side: 15%
Rating: BUY
HDFC Bank’s Q3FY20 result was better than our expectations. While the provisional loan growth was already indicating a strong bottom-line, better than expected other income helped in exceeding street expectations. Though there was a marginal blip in asset quality (one off), it is very much under control.
Key Investment Rationale:
· Loan growth remained strong, largely driven by corporate, retail loans slowed down:
· Slippages were quite high, led by one off accounts, NPAs saw a marginal weakening:
· NII growth moderated, partly due to higher slippages, NIM remained flat:
· Fee income remained strong, treasury gains/higher recovery from written off accounts lead to higher PAT:
Valuations & View:
Gross slippages remained elevated, led by one off items; however, the bank’s business growth has been strong with stable NPAs%. With CAR of 18.5% the bank is well capitalized to meet growth for multiple years. At the CMP the stock is trading at 4.0x its FY21E ABV, we Maintain BUY rating on the stock with a target price of Rs 1475.
Research Analyst
Siddharth Purohit