Buy HDFC Bank; target of Rs 1427: KRChoksey

KRChoksey's research report on HDFC Bank

Advances grew 16.8% YoY (+3% QoQ) driven by wholesale loans growing 30% YoY. Deposit grew 20.3% YoY (3.4% QoQ) with CASA improving to 41.4%, higher by 190 bps. The C-D ratio fell 950 bps QoQ to 84.5%. The bank maintains its strategy to continue to scale its deposit franchise despite higher liquidity. NIMs were lower by 20 bps QoQ to 4.1% driven by the higher share of wholesale book and liquidity. The bank’s GNPA were lower by 30bps to 1.1% on account of standstill levied by the SC. Ex the same would have been 1.37% and NNPA would have been 0.35% vs 0.1% as reported. The bank has nevertheless provided for the same. The provisions were lower at INR 3,704 Cr as the bank front ended the provisions in the previous quarter. The bank’s PCR stood at 195% (after considering all categories of provisions). PAT grew steadily by 12.8% QoQ and 18.4% YoY.

Outlook

We expect the premium in valuation to continue. We maintain our target of INR 1,427 per share, an upside of 18.5% over the CMP; implying a P/B multiple of 3.5x to FY22E ABV of INR 402. Accordingly, we reiterate our “BUY” rating on the shares of HDFC Bank.