Enviable performance to continue… HDFC Bank, a new-generation bank, is the second largest private sector bank in India. The Bank has a nationwide distribution network of 4,804 branches and 12,808 ATM’s in 2,666 cities/towns as of Q1FY19. The bank has grown its balance sheet at a healthy pace of 22% CAGR over FY13-18 maintaining high profit CAGR of 21%.
Valuation: HDFC Bank delivered another quarter (Q1FY19) with strong and stable performance. We are structurally positive on the bank given its topnotch asset quality, robust retail franchise, strong balance sheet growth and best-in-class management pedigree. Further, with its recent capital raising plan of Rs24,000cr, the bank is expected to accelerate balance sheet growth from here and continue gaining market share in both assets and liabilities. We expect the bank to maintain superior return ratios with RoE of ~19% and RoA of ~2% over FY18-20E. As a result, HDFC bank will continue to enjoy premium valuation within banking space. Hence, we maintain a BUY rating on the stock with a target price (TP) of Rs2,388 (4.4x FY20E P/ABV).
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