Buy HDFC Bank; target of Rs 1720: Motilal Oswal

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Motilal Oswal's research report on HDFC Bank

HDFC Bank (HDFCB) reported a strong performance, with advances growth driven by both corporate and revival in the Retail segment. Operating performance remained steady, led by healthy business growth, sequential margin improvement, and cost control. The bank further shored up provisions, providing INR24b toward potential NPAs (not declared due to the SC order) and other contingent provisions. n Asset quality remained stable, while total restructuring stood at 0.5% of loans. Proforma slippages stood at INR49b; the bank holds a sufficient additional contingent provision buffer to manage the COVID impact. n We marginally increase our estimates for FY22/FY23 and expect an earnings CAGR of 20% over FY20–23E. Maintain Buy.

Outlook

We marginally increase our earnings estimates and expect a 20% PAT CAGR over FY20–FY23E – with ROA/ROE of 2.1%/18.2% for FY23E. Maintain Buy, with revised TP of INR1,720 (3.7x Sep’22E ABV).

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