Motilal Oswal's research report on HDFC Bank
HDFC Bank (HDFCB) has exhibited a healthy revival in retail loan growth propelled by a pick-up in unsecured segments while the commercial banking segment has also witnessed strong traction. These have enabled a recovery in NII growth and will support Margin/PPoP growth – both of which have likely bottomed out in our view. The bank has been expanding its presence in the Semi-urban and Rural (SURU) regions, which is enabling it to capitalize on the growth opportunities. HDFCB is steadily becoming the largest lender in MSME financing. HDFCB maintains a healthy market share across digital channels – 18% share in POS terminals, 9%/27% in debit/credit card spends, and 23% in o/s credit cards as of 9MFY22. About 96% of the transactions occur digitally that enable a strong control on cost ratios. Asset quality remains robust with credit costs undershooting the long-term trend. HDFCB is thus increasing the contingency buffers prudently, which provide comfort. We expect the bank to deliver a healthy business growth fueled by a pick-up in retail (unsecured products) business and continued strength in commercial banking business.
Outlook
We estimate HDFCB to report ~18% PAT CAGR over FY22-24, with an RoA/ RoE of 2.0%/17.5% in FY24E, respectively. The stock has undergone a significant correction and is trading at ~2SD below its 10- year average valuations, while the growth and earnings outlook remains robust. HDFCB continues to be our high conviction BUY in the banking space and we retain our TP of INR2,000 (premised on 3.4x FY24E ABV + INR127 from subsidiaries). Our TP implies 51% potential upside from the current level.
More Info
At 17:30 HDFC Bank was quoting at Rs 1,392.10, up Rs 21.35, or 1.56 percent.
It has touched an intraday high of Rs 1,426.30 and an intraday low of Rs 1,380.20.
It was trading with volumes of 297,516 shares, compared to its thirty day average of 379,822 shares, a decrease of -21.67 percent.
In the previous trading session, the share closed up 3.29 percent or Rs 43.70 at Rs 1,370.75.
The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,292.00 on 18 October, 2021 and 08 March, 2022, respectively.
Currently, it is trading 19.27 percent below its 52-week high and 7.75 percent above its 52-week low.
Market capitalisation stands at Rs 771,746.74 crore.
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