HDFC Bank is a leading private sector bank with a loan book of Rs 13.7 lakh crore, it has shown consistent growth and operational performance over various cycles. It has given consistent performance with +4% NIM and +15% RoE in past many years. In a recent development, the bank has announced a reverse merger with HDFC holdings Ltd. The bank has maintained superior return ratios compared to its peers resulting in premium valuations. The bank has shown strong growth in Q4FY22 results as per the ICICI Securities brokerage. In its recent result, the brokerage has maintains a buy rating for a target price of Rs 1,650 for a target period of 12 months. On 11th May 2022, the stocks of the bank closed at Rs 1,348.60. Today, Thursday, May 12, 2022, the stock is trading at Rs 1,308, IST 01:24.
Q4FY22 Results: Credit offtake impressive; margins steady
The brokerage has said the Bank reported a decent overall performance. Explaining in datils, the brokerage has said, "Overall operating performance was decent with NII growth of 10.2% YoY and 2.3% QoQ to Rs 18872 crore, NIMs were down 20 bps YoY and 10 bps QoQ. This was on account of a shift towards secured lending and better rated corporate borrowers, which generally give lower yields. Other income was down 6.7% QoQ and flat YoY on account of lower treasury income. Fee income was up 12% YoY but was lower than loan growth. C/I ratio inched up from 37% to 38.3% QoQ as cost slightly grew faster than income. Provisions for the quarter were up 10.6% YoY as the bank continued to add contingent provisions worth Rs 1000 crore to its kitty. However, on a YoY basis, provisions declined 29%. Thus, as a result, PAT for the quarter came in at | 10055 crores, up 22.8% YoY. Asset quality improved sequentially as GNPA and NNPA ratios fell 9 bps and 5 bps QoQ to 1.17% and 0.32%, respectively, while the restructured book was at 114 bps of loans vs. 134 bps in the previous quarter. Business growth was strong in this quarter as loans were up 8.6% QoQ and 20.8% YoY to Rs 13.7 lakh crore and traction was driven by the corporate segment up 12% QoQ, agri up 15% QoQ and 9% uptick in MSME segment. Deposit growth was also healthy at 16.8% YoY and was driven by 22% YoY CASA uptick."
Key triggers for future price performance
Explaining the key triggers for future price performance, the brokerage in its latest report has stated, "Strengthening of liability franchisee would aid in containing cost of fund in a rising interest rate scenario. Focus on improving mix towards MSME should offset lending to better-rated borrowers, rising corporate pie keeping margin in a tight band. Building up of physical/digital infra to drive growth though merger-related clarification to precede fundamentals in the near term "
The brokerage maintains a buy rating for a target price of Rs 1,650
According to the brokerage, "HDFC Bank's share price has grown by over 70% in the past five years. We believe the merger could result in increased volatility. However, the recent correction provides a good entry opportunity considering the kind of strong and consistent franchise HDFC Bank has been. We remain positive and retain our BUY rating on the stock." It added, "We lower our target multiple on HDFC Bank at ~3x FY24E ABV & Rs 50 for subsidiaries; thus reducing our TP from Rs 2000 to Rs 1650."
The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.