HDFC Bank shares rise on positive Q1 business update; analysts see at least 20% upside potential

HDFC Financial institution’s advances aggregated to roughly Rs 11.48 lakh crore on the finish of June this 12 months.
(Picture: REUTERS)

HDFC Bank’s share worth was up 2.3% on Tuesday, buying and selling at Rs 1,529 apiece amongst high performers on Sensex. Shares of the non-public sector lender rose as traders reacted to the April-June quarterly enterprise replace supplied by the corporate. The most important non-public sector lender within the nation noticed wholesome enterprise development through the second wave of the pandemic advances rising 14.4% on-year foundation. HDFC Financial institution share worth is down greater than 6% because the finish of February this 12 months when the inventory reached a recent 52-week excessive of Rs 1,650 apiece.

Enterprise efficiency

-Mortgage development through the quarter was 14.4% larger than the earlier 12 months and 1.3% higher than the earlier quarter.
-HDFC Financial institution’s advances aggregated to roughly Rs 11.48 lakh crore on the finish of June this 12 months.
-Home retail loans grew by 10.5% on-year whereas home wholesale loans grew 17%.
-Retail loans grew by 9.0% from the earlier 12 months; industrial and rural banking loans grew by round 25.0%; and different wholesale loans grew by 10.5% throughout the identical time interval.
-Deposits aggregated to roughly Rs 13.46 lakh crore, a development of 13.2% from the year-ago interval.
-HDFC Financial institution mentioned its CASA deposits aggregated to roughly Rs 6.12 lakh crore up 28.2% from the earlier 12 months.

What do brokerage corporations make of it?

CLSA – Purchase

Goal worth – Rs 1,825 

Whereas there was information move about company deleveraging and even HDFC Financial institution’s company banking head has identified repayments from giant corporates, HDFC Financial institution has been capable of preserve constructive mortgage development in non-retail loans. We worth HDFC Financial institution primarily based on a consolidated foundation utilizing adjusted guide worth of fairness per share. Our goal worth for the financial institution relies on 3.5x Mar-23CL PB. We consider HDFC Financial institution deserves a premium versus friends, given its larger profitability and stronger underwriting high quality.

Motilal Oswal – Purchase

Goal Worth – 1,800

HDFC Financial institution continues to ship higher development traits v/s its friends, led by wholesome traits in Wholesale advances. Additionally, Retail deposit traits stay wholesome, whereas a pointy sequential drop in Wholesale deposits affected deposit development in 1QFY22. Within the close to time period, lifting of RBI restrictions and new stress formation because of the second COVID wave can be a key monitorable. We preserve our Purchase ranking with a TP of Rs 1,800/share (3.5x FY23E ABV).

Axis Financial institution – Purchase

Goal price- 1,785

The financial institution has managed to maintain its efficiency amidst Covid-19 uncertainties, each on the expansion entrance in addition to on the asset high quality entrance. Nevertheless, moderation is seen within the retail guide, now forming 45% of the overall mortgage guide, down from 47% a 12 months in the past. Lifting ban on new bank cards shall be a key monitorable. We consider HDFC Financial institution stays one of many resilient shares within the sector. We presently have a BUY on the inventory with a goal worth of Rs 1785/share.

Emkay  World – Purchase

Goal worth – 1,850

Total, we consider that HDFCB’s credit score momentum has moderated a bit in Q1, dragged primarily by continued weak spot within the retail phase. The financial institution has well-managed its asset high quality after the second Covid wave, however new stress formation in CV, SME and PL resulting from back-to-back disruptions shall be a key monitorable. At present, we’ve got a Purchase ranking on HDFCB with a TP of Rs1,850, given its cross-cycle finest asset-quality efficiency, sturdy franchise/capital profile, higher development outlook and superior return profile.