Brokerages are bullish on HDFC Bank as India’s largest private bank reported strong earnings in the first quarter of the financial year 2022-23. They see a potential growth of up to 34 per cent, with the majority of them, seeing the share price of a bank would surge to Rs 1800 per share.
HDFC Bank on Saturday reported an in-line NII and PAT, while PPOP and asset quality saw some blips due to higher treasury losses and slippages. Similarly, the bank’s loan growth was driven by sustained momentum in the Retail segment, along with steady growth in commercial and rural banking.
The margin on HDFC Bank stood flat sequentially and is expected to improve gradually, while asset quality ratios have deteriorated marginally, while the restructured book moderated to 76 basis points of loans, brokerages believe.
The shares of HDFC Bank on Tuesday were trading at nearly 1 per cent higher to Rs 1358.4 per share on the BSE as against a 0.06 per cent rise in the S&P BSE Sensex.
We expect HDFCB to deliver around 20% PAT CAGR over FY22-24, with an RoA/RoE of 2%/17.5% in FY24. We maintain our Buy rating with a TP of Rs 1,800 per share (premised on 3x FY24E ABV). HDFC Bank remains among our preferred picks. We expect the stock to perform gradually as revenue and margin revive over FY23, while clarity emerges on several aspects related to the merger with HDFC.
We believe better credit growth/NIMs and a pick-up in fees will lead to a steady improvement in core profitability (18% CAGR over FY23-25E), while lower LLP should lead to healthy RoAs/RoEs of around 1.9%/17% over FY23-25E. We believe the mortgage business will be long-term RoE-accretive. We retain Buy with a TP of Rs 1,800 per share (2.2x FY24E ABV).
We believe that the bank is on an accelerated growth path with strong advances growth led by retail and MSME segment along with healthy low-cost deposit mobilisation. The bank’s continuous building up of its digital capabilities and franchise network may bode well for growth going ahead. We maintain a Buy rating with target of Rs. 1,800. Trading at 2.6x/2.2x its FY23E & FY24E core ABV.
Asset quality saw a blip due to higher slippages of which 25% were attributable to OTR and agri, although recoveries were higher. We remain positive on HDFC Bank even though near-term focus would remain on the merger and subsequent conditions. We maintain multiple at 3.2x on Mar’24 ABV and TP at Rs1,740. Retain BUY.