Buy HDFC Bank; target of Rs 1720: KR Choksey

KR Choksey's research report on HDFC Bank

In Q1FY22, NII grew to INR 17,009 Cr from INR 15,665 Cr in Q1FY21 (8.6% YoY growth) driven by advances growth of 14% YoY. The Bank’s continued focus on deposits helped in maintenance of a healthy liquidity coverage ratio at 126%. PPOP grew 18% YoY at INR 15,137 Cr in Q1FY22 from INR 12,829 Cr in Q1FY21 driven by other income (non- interest income) growth of 54% YoY at INR 6,289 Cr. Provisions for Q1FY22 stood at INR 4,831 Cr, an increase of 24% YoY and 3% QoQ. The GNPA were 1.47% in Q1FY22 vs a comparable 1.32% in Q4FY21. The credit costs was reported at 1.67% in Q1FY22 vs 1.64% in Q4FY21 and 1.54% in Q1FY21. In Q1FY22, the retail loans grew by 9.3% YoY while the commercial banking loans grew by 25% YoY and other wholesale loans grew by 10.2% YoY. The overseas advances constituted around 3% to the total advances. On deposit front, CASA grew 28% YoY while term deposits grew 3.1% YoY. CAR was at 19.1% in Q1FY22 as against 18.9% in Q4FY21, improvement of 20 bps QoQ.

Outlook

We maintain our target price of INR 1,720 per share, implying a P/ABV of 3.6x FY23E P/ABV, an upside of 16.9% over the CMP. Accordingly, we reiterate our BUY rating on the shares of HDFC Bank Ltd.

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