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HDFC Bank delivered steady performance for Q2FY19, with PAT growth of 20.6% yoy. On the operating front, the bank reported 20.6% yoy growth in NII. NIM, at 4.37% was down by 17bps qoq & increased by 10bps yoy. The bank managed to reduce its expenses and brought down the cost/income ratio from 41.5% in Q2FY18 to 39.9% in Q2FY19.

Outlook & Valuation: Credit growth beat the industry growth rate, driven by strong retail business. The Strong liability franchise and healthy capitalisation provides strong earning visibility. We value the bank’s subsidiaries at `121/share and the core bank at `2,228/share (3.7x FY2020E ABV). We recommend Buy rating on the stock with a target price of `2,350/share.

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