Accumulate HDFC Bank; target of Rs 1647: Arihant Capital

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Arihant Capital's research report on HDFC Bank

HDFC Bank has posted better than expected Q3FY21 results with strong profitability driven by lower credit cost. Net Interest Income stood at Rs 16,318 Cr, increasing by +15.1% YoY/+3.4% QoQ, PPOP stood at Rs 15,186 Cr, increasing by +17.3% YoY/+9.9% QoQ and Net Profit at Rs 8,758 Cr, grew by +18.1% YoY/+16.6% QoQ. Provisions for the quarter stood at Rs 3,414 Cr as against Rs 3,704 Cr in Q2FY21, with Rs 2,400 Cr of total contingent provisioning for proforma NPA. On business growth front, the bank’s loan book grew by +15.6% YoY/+4.2% QoQ to Rs 10.82 lakh Cr while deposits grew strongly by +19.1% YoY/+3.4% QoQ to Rs 12.71 lakh Cr on account of bank’s strong customer loyalty. NIM during the quarter improved by 10bps QoQ at 4.2%, largely due to strong growth in low cost deposits. The advances growth was driven primarily by the substantial growth in the corporate lending at +23.5% YoY while retail loan growth slowed to +4% YoY owing to the bank’s strict credit lending measures and visible growth in corporate segment.

Outlook

BV multiple of 3.7x for FY23E ABVPS of Rs 445 for a target price of Rs 1,647 per share and maintain our ‘ACCUMULATE’ rating on the stock.

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