Robust YoY Loan Growth Reported, Buy This Banking Stock For 36% Return: Motilal Oswal Suggests

Brokerage firm Motilal Oswal suggests buying the stocks of HDFC Bank. According to the bank's internal classification, Retail loans grew 21.5% YoY and 5% QoQ. Commercial and Rural Banking continues to remain strong (up 29% YoY and 3% QoQ).

Target Price, Current Market Price

The Current Market Price (CMP) of HDFC Bank is Rs. 1,355. Motilal Oswal has estimated a Target Price for the stock at Rs. 1,850. This stock has the potential to give a 36% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 751,308 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1,355
Target Price	Rs. 1,850
Potential 1 year return	36.53%
52 week high share price	Rs. 1,725
52 week low share price	Rs. 1,271.60

The bank's deposit base rose 19.3% YoY and 2.9% QoQ to Rs. 16.1t. CASA deposits grew 20% YoY, but fell 2.2% QoQ. The CASA mix declined by 220bp QoQ to 46%. Retail/Wholesale deposits grew 18.5%/22.5% YoY and 3.5%/0.5% QoQ. Corporate and the other Wholesale book too picked up and grew 15.5% YoY (flat QoQ).

Stock advantages: Motilal Oswal

Commenting about the stock, Motilal Oswal said, "HDFC Bank reported robust YoY loan growth, but the same was below trend on a sequential basis. A healthy revival was witnessed in Retail loans, while Commercial Banking and Corporate segment saw strong traction and will likely support growth in PPOP. We expect the margin trajectory to recover gradually over FY23, while the uptick in Retail loan growth and Unsecured products will be supportive of fee income. The trend in Retail deposits softened, with the bank witnessing a sequential decline in its CASA ratio to 46%."

"The bank purchased loans aggregating Rs. 95.3b in 1QFY23, through the direct assignment route, under a Home loan arrangement with HDFC," the brokerage firm added.

Company profile:

HDFC Bank is one of India's leading private banks and was among the first to receive approval from the Reserve Bank of India (RBI) to set up a private sector bank in 1994. HDFC Bank offers a wide gamut of commercial and transactional banking services to businesses and organizations of all sizes. HDFC Bank has a banking network of 6,342 branches and 18,130 ATMs in 3,188 cities/towns. Total advances of the bank picked up and grew at a healthy pace of 21.5% YoY. Sequentially, advances grew 1.9% (v/s 8.6% in 4QFY22) to Rs. 13.9t.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.