Buy HDFC Bank; target of Rs 1750: Dolat Capital Market

Dolat Capital Market is bullish on HDFC Bank has recommended buy rating on the stock with a target price of Rs 1750 in its research report dated January 16, 2021.

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January 19, 2021 / 15:41 IST

26 Aug, 2025 12:21

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Dolat Capital Market's research report on HDFC Bank

HDFC Bank reported in-line NII growth of 15% YoY, though higher PPoP growth of 17% YoY benefitted from elevated treasury gains and superior fee lines. NIM improved by ~10 bps QoQ to 4.2%. Pro forma slippages and gross NPA remained below expectations at 1.86% (annualized) and 1.38% (stable QoQ) respectively. Loan restructuring is expected to be at 0.5% of advances, mostly from retail segment, part of which is also included in pro forma NPAs. Additional contingent provisions of ~Rs24bn were made during 3QFY21, mainly towards pro forma slippages. Pro forma credit costs stood at 116 bps for the quarter. Total excess provision buffers including floating and contingent provisions at ~Rs69bn or 0.6% of advances (ex of those made against pro forma NPAs over last two quarters) remains largely unutilized. Sequential loan growth was broad based, with both retail and corporate segments growing at ~4% each. Total ECLGS disbursements (including 1.0 and 2.0) stood at ~2% of bank’s net advances. Management remained optimistic on asset quality trends with superior bureau scores of new acquisitions relative to industry, improving SMA-1 portfolio over the last few months (for >5cr exposures), and further reduction in anticipated stress for the SME book (at 2.75% from 3% earlier). Lowering our slippages and credit cost estimates and factoring in higher fee income, earnings have been revised upwards by 17%/12% for FY21E/22E. Unutilized contingent provisions at 0.6% of loans along with strong capital position and exposure to top end customers across segments provide significant comfort to earnings profile.

Outlook

We maintain our BUY recommendation on the stock with a SOTP-based TP of Rs 1,750 (from Rs 1,650 earlier), implying 3.8x Dec-22E P/ABV. The stock currently trades at 3.2x Sep-22E ABV.

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