Buy HDFC Bank; target of Rs 1910: Arihant Capital

Arihant Capital's research report on HDFC Bank

HDFC Bank during Q3FY22 has reported strong 18% YoY growth in profit at INR 10,342 cr was higher than our estimate of INR 9,972 cr. NII for the quarter grew by 13% YoY/4% QoQ to INR 18,443 cr driven by credit growth of 16.5% YoY. NIM of the bank stood stable at 4.1%. Operating profit growth for the quarter moderated to 11% YoY to INR 16,776 cr was higher than our estimate of INR 16,524 cr. Moderation in operating profit growth was due to lower fee income growth. Other income growth for the quarter moderated at 10% YoY/11% QoQ to INR 8,184 cr. Provisions for the quarter decreased sequentially by 24% to INR 2,994 cr. As a prudent strategy, Bank has made INR 900 cr contingent provision and carries total cumulative (floating + contingent) provision of INR 10,087 cr (0.8% of loans). Headline NPA ratio improved by 9bps QoQ due to lower slippages and better recoveries.

Outlook

We tweak our estimates marginally and upgrade our rating on the stock to Buy from Accumulate with a revised TP of INR 1,910 (earlier INR 1,935), implying 3.6x FY24E P/ABV.