LKP Research has given Buy recommendation for HDFC Bank with a target price of Rs. 1831 in its research report issued on Apr 18, 2022

LKP Research’s research report on HDFC Bank

HDFC Bank reported a strong trend on assets quality and moderate operating performance in 4QFY22. The slippages decreased 13% sequentially, which resulted in improvement in GNPA ratio to 1.17% v/s 1.17% in the previous quarter. The reported GNPA is well below the historical trend of 1.4%. Moreover, the restructuring book decreased to ~115bps of overall loan v/s 136bps in the previous quarter; Secured loans contributes ~30% of restructured book. Furthermore, the contingent stands adequate. In 4QFY22, the provisioning expenses were slightly higher sequentially at ₹33bn (v/s ₹30bn 3QFY22), which includes contingent provision buildup of ₹10bn. At the same time NII growth was slower (10% YoY, 2% QoQ) against the loan growth (21% YoY, 9% QoQ) Thus, the bank has reported sequential decrease in PAT by 3% and ROA/ROE of 2.1%/16.8% v/s 2.2%/18.0% in the previous quarter. However, the management emphasized the slower NII growth will be compensated by lower specific provisioning expenses. We believe, superior underwriting practices, higher liquidity, adequate coverage and strong capital position makes the bank best in class and thus, we recommend BUY.

Outlook

HDFC Bank is expected to outperform the sector led by 1) healthy balance sheet growth, 2) much higher provision than regulatory requirement in the balance sheet, 3) strong capital cushion of 17.9% at Tier1 level and d) best in class underwriting and risk management practices. Given these strengths we expect HDFC Bank to remain one of the best among all the lending business. Thus, we continue to maintain BUY rating on the bank with target price of ₹1,831.

More Info

At 17:30 HDFC Bank was quoting at Rs 1,395.35, down Rs 69.50, or 4.74 percent.

It has touched an intraday high of Rs 1,440.00 and an intraday low of Rs 1,390.10.

It was trading with volumes of 493,756 shares, compared to its thirty day average of 467,630 shares, an increase of 5.59 percent.

In the previous trading session, the share closed down 1.90 percent or Rs 28.40 at Rs 1,464.85.

The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,292.00 on 18 October, 2021 and 08 March, 2022, respectively.

Currently, it is trading 19.08 percent below its 52-week high and 8 percent above its 52-week low.

Market capitalisation stands at Rs 773,797.06 crore.

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