Prabhudas Lilladher has given Buy recommendation for HDFC Bank with a target price of Rs. 2000 in its research report issued on Apr 17, 2022

Prabhudas Lilladher’s research report on HDFC Bank

HDFCB’s PAT at Rs100.6bn was a miss (PLe: Rs115.04bn), due to weaker NII and other income although opex was lower. Asset quality was stable and OTR pool is ~1.1% of loans. NII traction remained softer than loan growth due to non-retail focus. HDFCB’s credit accretion in the recent past has been primarily led by wholesale and CRB, since credit standards were tightened in retail due to COVID. This has been a drag on margins. Loan mix in terms of non-retail/retail stands at 61/39 compared to 50/50 pre-pandemic. Balance sheet strength is suggested by a PCR of 70%+, contingent provisions at 71bps and a CET-1 of 16.7%.

Outlook

However, near term RoE (FY23 & FY24) could remain between 16-17% as commentary suggests that the positive effect on NIM that could emanate from faster retail credit offtake, may take 4-6 quarters to materialize and as rates rise, CASA share is expected to moderate. We reduce our PAT for FY23E/24E by ~6% each, owing to lower NII and other income. Hence, we cut our target multiple from 3.6x to 3.2x on Mar’24 ABV and trim our TP from Rs2,000 to Rs1,740. Retain BUY.

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