Emkay Global Financial is bullish on HDFC Bank has recommended buy rating on the stock with a target price of Rs 1300 in its research report dated October 05, 2020.
Emkay Global Financial's report on HDFC Bank
Credit growth was healthy at 3% qoq/16% yoy (1% qoq/21% yoy in Q1) to Rs10,370bn, largely in line with our expectation. Overall growth seems to be better than the industry, primarily due to a pick-up in retail loans as indicated by our channel checks, and continued momentum in corporate loans (mainly working capital). Mortgage loan portfolio buyout (Retention) from HDFCL was up at Rs30.3bn vs. Rs13.8bn in Q1FY21 but still lower than Rs71.5bn in Q2FY19. We believe that low portfolio buyout could be partly due to lower PSL requirement with moderation in the bank's overall growth. Deposit growth has moderated a bit - up 3% qoq/20% yoy to Rs12,290bn, but the CASA ratio has improved qoq to 42% as incremental qoq deposit growth of Rs396bn has been largely through CASA deposits and thus, should support margins.
Overall business momentum for HDFCB remains healthy compared to the industry, but we believe that the asset quality trend and management transition will be the key things to watch out for in the near-to-medium term. Currently, we have a Buy rating on the stock with a TP of Rs1300, given its strong stress management capability across cycles and superior return ratios.
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