HDFC Bank Ltd. share price target

We attended HDFC Bank’s Analyst Day (on May 24, 2023) which involved day-long presentations from top management and various vertical heads. The bank remains confident of superior credit growth, comfortable asset quality and steady profitability metrices.

We value the core book at 3.2x Sep'24E ABV and assign a value of Rs 71/share to the subsidiaries, thereby arriving at a target price of Rs 1,975/share, implying an upside of 18% from the CMP.

Central bank permits leeway on PSL norms post-merger which will aid HDFCB's margins and asset quality in the immediate term

With clarity on regulatory dispensations, HDFC Bank, in our view, has crossed a major milestone in its journey towards big-bang merger with parent HDFC Limited. RBI has granted some leeway pertaining to PSL compliance, holding stake in the insurance businesses and LAS business of HDFC Limited though there is no relaxation on CRR, SLR and LCR front.

Deposits outpaced loan growth YoY while a higher cost of funds led to 14bps contraction in NIM to 4.2% in Q4; FY24 NIM guided at 4.1%

We maintain our BUY recommendation on the stock.