Prabhudas Lilladher has given Buy recommendation for HDFC Bank with a target price of Rs. 1870 in its research report issued on Jan 17, 2022
Prabhudas Lilladher’s research report on HDFC Bank
HDFCB’s PAT at Rs103.42bn was marginally higher than estimate (PLe: R101.53bn), led by a better than expected NII growth of 13% YoY on the back of healthy loan growth of 16.5% YoY. NII traction remained lower than loan growth for some time now due to high B/S liquidity & non-retail focus. In our view, HDFCB has faced challenges in maintaining loan growth momentum leading to slower NII growth. Said that, improving traction in retail and commercial & rural banking is expected to improve loan & fees coupled with contained slippages will lead to improvement in overall earnings.
We believe that bank has a strong balance sheet with PCR of 70% and ability to absorb higher credit losses, comfortable contingency provisions and restructured stock at <1.5%. With higher earnings visibility leading to superior ROEs of 17-18% over FY23-FY24E, HDFCB stands as one of the best placed in the industry. We reiterate BUY with unchanged TP of Rs1,870 retaining our target multiple at 3.6x Sep-23 ABV.