HDFC Bank delivered steady performance for Q4FY2019, with PAT growth of 22.6% yoy. Pre-provision profit grew at healthy rate of 22.7% yoy, however it was lesser than previous quarter (27.6% yoy) largely owing to moderation in fee income. NIM improved 10bps yoy (4.4%), led by change in loan mix. The bank managed to reduce its expenses and brought down the cost/income ratio from 40.6% in Q4FY2018 to 39.6 % in Q4FY2019.
Outlook & Valuation: Credit growth beat the industry growth rate driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method, valuing standalone banking business at 3.4x of FY21 ABV and its two subsidiaries at `135/share. We recommend a Buy on the stock, with a target price of `2,500.