Buy HDFC Bank; target of Rs 1550: ICICI Direct

ICICI Direct's research report on HDFC Bank

NII came in at Rs 14173 crore led by healthy growth in advances. Margins were steady at 4.2% due to slower growth in high yielding book & higher accretion in term deposit. Other income growth continued to remain robust at 35.5% YoY to Rs 6669 crore, led by 24% YoY growth in fee income & treasury income of Rs 940 crore. Led by healthy growth in NII and other income, PPP came in at Rs 12945 crore, up 20% YoY. However, provisions continued to remain elevated at Rs 3043 crore, consisting of ~Rs 2884 crore of specific provision. Healthy operational performance coupled with reduction in tax rate led to healthy 32.8% YoY growth in earnings to Rs 7416 crore.

Outlook

Accordingly, we maintain our BUY recommendation with a revised target price of Rs 1550 (earlier Rs 1440) valuing the bank at ~20x FY22E EPS (3.7x FY22E ABV) and include Rs 75 per share for HDB Financial Services.