Buy HDFC Bank; target of Rs 1550: ICICI Direct
ICICI Direct’s research report on HDFC Bank
NII came in at Rs 14173 crore led by healthy growth in advances. Margins were steady at 4.2% due to slower growth in high yielding book & higher accretion in term deposit. Other income growth continued to remain robust at 35.5% YoY to Rs 6669 crore, led by 24% YoY growth in fee income & treasury income of Rs 940 crore. Led by healthy growth in NII and other income, PPP came in at Rs 12945 crore, up 20% YoY. However, provisions continued to remain elevated at Rs 3043 crore, consisting of ~Rs 2884 crore of specific provision. Healthy operational performance coupled with reduction in tax rate led to healthy 32.8% YoY growth in earnings to Rs 7416 crore.
Due to its focus, the bank has been able to maintain its leadership in retail loans with a slew of festive treats offer. Further, they have also stepped up corporate loans to offset the slowdown in the auto sector. The selection of the new MD continues to remain an overhang on the stock. The bank continues to remains a portfolio stock and maintains premium valuations. Accordingly, we maintain our BUY recommendation with a revised target price of Rs 1550 (earlier Rs 1440) valuing the bank at ~20x FY22E EPS (3.7x FY22E ABV) and include Rs 75 per share for HDB Financial Services.
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