Emkay Global Financial has given Buy recommendation for HDFC Bank with a target price of Rs. 2050 in its research report issued on Jan 04, 2022

Emkay Global Financial’s report on HDFC Bank

HDFC Bank reported healthy but in-line credit growth of 16% yoy/5% qoq in Q3FY22 (total loans stood at ~Rs12.6tn). This looks much more balanced and broad based. Retail loans grew by 13.5% yoy/4.5% qoq, commercial & rural banking were up 30% yoy/6%, while corporate growth reaccelerated to 7.5% yoy/4.5% qoq. HDFCB continues to hold a relatively larger housing portfolio from HDFC Ltd, totaling Rs74.6bn (Rs71bn in Q2FY22/Q3FY21). Adjusted for portfolio buyouts too, overall credit growth was 16.5% yoy/5% qoq. Notably, the bank has started regaining market share in cards, and should see further acceleration, along with PL, subject to absence of or partial lockdown situation. Deposit growth has moderated a bit to 14% yoy/3% qoq, while CASA deposit growth remained stronger at 25% yoy, partly benefiting from the RBI’s directive to maintain current accounts with only the main lender. The CASA ratio remains high and healthy at 47%, leading to better CoF. This, coupled with better LDR (up 200bps qoq to 87%), should support NIMs, which otherwise remain under pressure due to the higher share of corporate/mortgage book and interest reversal on NPAs. We expect overall NPAs to trend down due to better collection efficiency, mainly in the retail segment. However, agri NPAs would be the main monitorable. Moreover, asset-quality outcomes at its NBFC subsidiary, HDB Financial Services, will also be closely monitored, in view of the relatively risky customer/credit profile.

Outlook

However, we believe that the bank has built reasonable Covid buffers (0.8% of loans) and should be relatively resilient. After the recent correction, the stock is trading at a reasonable valuation (2.9x FY23/2.5x FY24 ABV). We have a Buy rating on HDFCB with a TP of Rs2,050, given its proven track record in managing asset quality across cycles, strong franchise/capital profile, and the ability to deliver superior return ratios.

More Info on Trent

At 15:20 hrs HDFC Bank was quoting at Rs 1,563.35, up Rs 34.95, or 2.29 percent.

It has touched an intraday high of Rs 1,572.00 and an intraday low of Rs 1,529.00.

It was trading with volumes of 195,265 shares, compared to its thirty day average of 279,846 shares, a decrease of -30.22 percent.

In the previous trading session, the share closed up 0.57 percent or Rs 8.70 at Rs 1,528.40.

The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,342.00 on 18 October, 2021 and 28 January, 2021, respectively.

Currently, it is trading 9.33 percent below its 52-week high and 16.49 percent above its 52-week low.

Market capitalisation stands at Rs 866,471.02 crore.

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