KR Choksey has given Buy recommendation for HDFC Bank with a target price of Rs. 1997 in its research report issued on Oct 19, 2021

KR Choksey’s research report on HDFC Bank

In Q2FY22, NII (Net Interest Income) grew to INR 17,684 Cr from INR 15,776 Cr driven by advances growth of 15.5% YoY. The Core NIMs (Net Interest Margins) stood at 4.1% in Q2FY22. PAT stood at INR 8,834 Cr, up by 17.6% YoY in Q2FY22. PPoP (Pre-Provision Operating Profits) grew 14.4% YoY driven by other income (non- interest income) growth of 21.5% YoY. Provisions for the quarter were at INR 3,925 Cr. Total provision for the quarter includes contingent provisions of INR 1,200 Cr. The credit cost for Q2FY22 stood at 1.30% vs 1.67% in Q1FY22. GNPA/ NNPA stood at 1.35%/ 1.40% in Q2FY22 as against 1.47%/0.48% in Q1FY22. Advances for Q2FY22 stood at INR 11,98,837 Cr, a growth of 15.5% YoY and 4.5% QoQ. Deposit growth for the quarter stood at 14.4% YoY/4.5% QoQ. CAR was at 20.1% which includes Capital Conservation Buffer of 1.87% and an additional requirement of 0.20% on account of the bank being identified as a Domestic Systematically Important Bank. CET-1 ratio stood at 17.4% for Q2FY22.

Outlook

We revise our target price to INR 1,997 per share, implying a P/ABV of 3.7x FY24E, giving an upside of 19.2% over the CMP. Accordingly, we reiterate our BUY rating on the shares of HDFC Bank Ltd. We expect this valuation to continue for the bank’s market position and relatively stronger customer segment. We are also positive on the bank’s overall outlook considering a healthy operating performance, strong brand equity, and improvement on the asset quality front.

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