HDFC Bank Q2 Results Review - Steady Quarter Despite Growth Slowdown: Dolat Capital

Dolat Capital Report

HDFC Bank Ltd. reported better than expected operating profits (+9% YoY) driven by lower opex and improved fee lines. Though slippages were contained at 1.3%, credit costs increased to 55 bps. Reversal of Rs 6.9 billion AIF provisions, however, helped better-than-expected PAT growth at 5% YoY.

Net interest margin was stable QoQ at 3.46% and is expected to be rangebound.

HDFC Bank’s decision to slow down on the cards book has worked well and it is not witnessing any overly asset quality concerns. Moreover, it is seeing improved retail disbursals, although it will take time to reflect in books.

LDR to normalize to pre-Covid levels in two-three years now, given the regulatory commentary and credit environment.

We tweak earnings post factoring in lower growth, offset by moderation in opex.

Maintain ‘Accumulate’ rating with revised target price of Rs 1950 (Rs 1800 earlier), valuing standalone bank at 2.3 times Sep-26E price-to-book value and adding value of subsidiaries. Rise in target price is mainly driven by higher subsidiary valuations.

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