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MOSL: MOrning India (17/October/22): 1. HDFC Bank (Earnings in line; Core PPoP growth and margin improve); 2. Avenue Supermarts; 3. Bajaj Auto; 4. L & T Infotech; 5. Shree Cement

MOrning India (17/October/22): 1. HDFC Bank (Earnings in line; Core PPoP growth and margin improve); 2. Avenue Supermarts; 3. Bajaj Auto; 4. L & T Infotech; 5. Shree Cement

Today’s top research idea

HDFC Bank: Earnings in line; Core PPoP growth and margin improve

• HDFCB reported a steady quarter with recovery in Core PPoP growth and margins though treasury loss dragged PPoP. PAT grew 20% YoY, aided by a pick-up in NII growth due to 10bp QoQ expansion in margin.
• Loan growth was driven by a sustained momentum in Retail segment, along with robust growth in Commercial and Rural Banking as well as Wholesale loans.
• Asset quality ratios remained robust, while the restructured book moderated to 53bp of loans. Healthy PCR and a contingent provisioning buffer provided comfort on asset quality.
• We estimate HDFCB to deliver ~19% PAT CAGR over FY22-24, with an RoA/RoE of 2.0%/17.2% in FY24. We expect the stock to perform gradually as revenue and margin revive further while the merger-related overhang ebbs as HDFCB looks to complete the merger by 1Q/2QFY24E.

• Piping hot news

  HDFC twins may merge a few months ahead of schedule: HDFC Bank CFO

  The merger between HDFC Bank and HDFC Ltd may be completed a few months or a quarter before the previously indicated deadline, said Srinivasan Vaidyanathan, chief financial officer, HDFC Bank. “Maybe there is (scope of the merger being completed) a quarter or a few months early. We had previously indicated September -- call it a Q2-Q3 (FY24) kind of timeframe. The way it is going, it may be Q1-Q2. That’s the way that I would put it. Maybe there is a few months…it is running ahead,” he said at a post-earnings analyst call on Saturday.