Buy HDFC Bank; target of Rs 2000: Motilal Oswal

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Motilal Oswal's research report on HDFC Bank

HDFCB reported an inline quarter with NII/PPoP growth of 12%/14% YoY and PAT growth of 18% YoY to INR88.3b (inline). Profitability came in strong despite creating an additional contingent provision of INR12b, thus taking the total buffer to ~INR78b (~0.65% of loans). The bank witnessed a healthy pickup in business momentum as deposits / loans were up 4.5% QoQ each. Retail segment grew ~13% YoY while Commercial and Rural Banking grew robustly at 27.6% YoY. CASA deposits grew 29% YoY and the ratio now stands at 46.8% (+130bp QoQ). On the asset quality front, GNPA/NNPA ratio improved by 12bp/8bp QoQ to 1.35%/0.4%, with slippages moderating to INR53b (1.8% of loans). On the other hand, the restructured book increased to 1.5% of loans (v/s 0.8% in 1QFY22). The management said the net impact of the restructured book on NPAs is likely to be 10-20bp. Higher provision coverage, along with a contingent provision buffer, provides comfort on asset quality.

Outlook

Our estimates remain unchanged at 20% PAT CAGR over FY21-24E, with a RoA/RoE at 2.1%/18.3% in FY24E. We maintain Buy and roll-forward our estimate to Sep'23E with a revised TP of INR2,000/share (3.6x Sep'23E ABV + INR120/share from subsidiaries).

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