Buy call for HDFC

Buy on HDFC with target price of Rs 2400.HDFC posted 35% growth in its net interest income for Q1FY09 to Rs 6.6billion. Growth was backed by 31% YoY growth in loan book to Rs 773 billion and 4bps improvement in spreads to 2.26%. However, NII growth was slightly below our estimates due to faster rise in deposit costs, up 17.7% YoY and 32.7% QoQ. Treasury income was nil during Q1FY09. Both these factors mainly resulted in reported earnings being lower by 7% at Rs 4.7billion against our estimate of Rs 5.1 billion. At current valuations, HDFC is trading at 3.6x and 3.2x its book value for FY09E and FY10E respectively.