Emkay Global Financial has given Buy recommendation for HDFC Bank with a target price of Rs. 2050 in its research report issued on Jan 16, 2022

Emkay Global Financial’s report on HDFC Bank

HDFC Bank reported in-line PAT of Rs103bn, up 18% yoy. However, core margins remained flat qoq at 4.1%. This has been an irritant in the past few quarters, mainly due to slow retail growth and an unfavorable portfolio mix. Core fee growth was also relatively moderate, but largely offset by better treasury gains/bad debt recovery. Credit growth improved further to 16.7% yoy/5% qoq, mainly led by commercial & rural banking (up 29% yoy/6%) and bounce-back in corporate book (7.5% yoy/4.5% qoq). Retail growth remains sub-optimal at 14% yoy/4.5% qoq, dragged by VF. That said, the pick-up in PL and card business in Q3 is positive, and might support NIMs, going forward. Asset quality continued to improve, with the GNPA ratio down by 9bps qoq to 1.26%, while NNPA remained industry-best at 0.4%. The RSA pool has come off by Rs28bn to Rs175bn/1.4%, of which nearly 50% was contributed by slippages. The bank expects limited relapse risk from RSA pool, with economy opening up and better customer quality.


The stock has underperformed after the management change, more so due to the RBI’s embargo on its card/digital initiatives and Covid-induced disruption. With growth trends improving and asset-quality well under control with strong buffers in place, we expect HDFCB to report healthy return ratios (RoE @ 17-18%). Retain Buy/OW in EAP with a TP of Rs2,050 (3.5x Dec FY23E ABV + subs valuation of Rs76).

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