YES Securities is bullish on HDFC Bank has recommended buy rating on the stock with a target price of Rs 1470 in its research report dated July 19, 2020.
YES Securities' research report on HDFC Bank
Earnings and Core PPOP beat of 15% and 5% respectively, driven by lower than anticipated opex (reflecting business modularity). NII growth of 18% and decline in core fees were largely in-line with our expectations. Credit cost was elevated at 1.6% as the bank augmented contingent provisions by Rs10bn, made accelerated provisions on upfronted slippages (<90dpd) and raised overall core PCR to 76%. The Bank continues to accrete capital led by lower risk intensity of incremental growth and sustained high profitability. Only 9% of the bank’s portfolio under moratorium as of 30th June, and 97% comprised 0 dpd (non-delinquent) customers as of 29th Feb. This implies potentially lower NPL flow and higher collectability of moratorium pool. Cheque bounce rate is improving too. With a wide distribution platform, sustained liability accretion and robust capital position, HDFC Bank possesses the ability to push the peddle on growth when market improves.
Outlook
Retain BUY and as the Top Pick in the sector with reinforced conviction. Have raised FY21/22 EPS estimates by 9%/6% with positive tweaks to growth, opex and credit cost assumptions. Stand-alone bank trades at 2.5x/15x FY22 ABV/EPS (Subs value at Rs69/share). We raise 12m TP to Rs1,470 (previous Rs1,300). Demonstrated resilience in growth/profitability and increasing relative attractiveness would lead to a secular re-rating.
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