November 3, 2017 . Equities Desk

Structural strength to drive earnings…

HDFC Bank, a new-generation bank, is the second largest private sector bank in India. The Bank has a nationwide distribution network of 4,729 branches and 12,259 ATM’s in 2,669 cities/towns as of Q2FY18. The bank has grown its balance sheet at a healthy pace of 21% CAGR over FY12-17 maintaining high profit CAGR of 23%.

Valuation: We are structurally positive on HDFC Bank considering its best inclass asset quality (Gross/Net NPA of 1.3%/0.4% by FY19E), superior deposit franchise and credit underwriting ability. It will help the bank to maintain superior return ratios with RoE of 20% and RoA of 2% over FY17-19E. Overall, the bank is well placed to benefit from the expected pick-up in the economic growth cycle. Hence, we maintain a BUY rating on the stock with a target price (TP) of Rs2,000 (4.6x FY19E P/ABV).

Research Report – HDFC Bank

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