Accumulate HDFC Bank; target of Rs 1935: Arihant Capital

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Arihant Capital's research report on HDFC Bank

HDFC Bank during Q2FY22 has reported strong 18% YoY growth in profit at INR 8,834 cr was higher than our estimate of INR 8,541 cr. NII for the quarter grew by 12% YoY/4% QoQ to INR 17,684 cr driven by credit growth of 16% YoY. NIM of the bank stood stable at 4.1%. Operating profit for the quarter increased by 14% YoY to INR 15,807 cr was in line with our estimate of INR 15,886 cr. Other income for the quarter grew strongly by 22% YoY/18% QoQ to INR 7,401 cr. Provisions for the quarter decreased sequentially by 19% to INR 3,925 cr. As a prudent strategy, Bank has made INR 1200 cr additional provision in Q2FY22 and carries total cumulative (floating + contingent) provision of INR 9,207 cr (0.8% of loans). Headline NPA ratio improved by 12bps QoQ due to lower slippages and better recoveries but higher restructuring was disappointing.

Outlook

By tweaking our estimates marginally and rolling our estimates over to FY24E, we maintain our Accumulate rating on the stock with a revised target price of INR 1,935 (earlier INR 1,721), implying 3.6x FY24E P/ABV.

For all recommendations report, click here

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