ICICI Direct recommended is bullish on HDFC Bank has recommended buy rating on the stock with a target price of Rs 2400 in its research report dated January 21, 2019.
ICICI Direct's research report on HDFC Bank
Steady margins of 4.3% and healthy credit growth of 23.7% YoY, led to robust operational performance. NII came in healthy, up ~22% YoY while operating profit came in strong at Rs 10778 crore, up 28% YoY Earnings growth continues to stay healthy at 20.3% YoY to Rs 5585 crore. Provisions stayed a tad higher at Rs 2211 crore, up 21.5% QoQ The bank witnessed marginal pain in the agri book. However, overall asset quality broadly remained stable with GNPA ratio at 1.38%. Given upcoming elections, exposure to agriculture remains at risk. The bank has, therefore, provided Rs 335 crore as contingent provision Advances growth remained healthy at 23.7% YoY to Rs 780951 crore. Retail & corporate growth remained healthy at 24% & 23% YoY, respectively. Within retail loans, unsecured loans including personal & credit cards continued to witness higher traction at ~33% YoY Fee based income growth continue to be robust at 27% YoY, supported by healthy traction in card business. Treasury gains of Rs 474 crore, compared to loss in Q2FY19, aided growth in other income.
Considering the healthy balance sheet growth, superior asset quality & management, the bank is well poised to deliver consistently with margin leadership & robust return ratios. Hence, the bank remains a portfolio stock with premium valuations. Given upcoming elections, exposure to agri remains vulnerable, however, contingent provision provides breather against spike in NPA. We roll over FY21E & broadly maintain our estimates at ~20% CAGR in NII, ~24% in PAT in FY19-21E. We upgrade our target price to Rs 2400 valuing at ~20x FY21E EPS (3.5x FY20E ABV) inclusive of Rs 50/share for HDB Financial Services. We maintain BUY rating.
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