Yes Securities sees 27% upside in HDFC Bank, revises target price to ₹1,870


Private sector lender HDFC Bank on Saturday reported a 18% year-on-year (y-o-y) rise in net profit to 8,758.29 crore for the three months to December owing to higher net interest income and other income. The bank’s net interest income — difference between interest earned and interested expended – grew 15.1% y-o-y to 16.317.6 crore. Its net interest margin — a key measure of profitability — stood at 4.2%. Banks net revenue jumped to 23,760.8 core for the quarter ended 31 December. Yes Securities retains the buy rating with an upward revision of 12 month target price at 1,870, 27% higher than its CMP.

Current market price of the bank stood at 1,467.

“We are revising FY21/22/23 earnings estimates by 10%/3%/4% respectively and ABV estimates by 1.5-2% for these years, after having upgraded these numbers even towards the end of November in our collection feedback report. Earnings revisions thus could be sharper for the consensus,” says Rajiv Mehta, Lead Analyst – Institutional Equities, Yes Securities.

Analysts say HDFC Bank has already recovered from the impact of covid and the balance sheet looks even more stronger.

“For the bank, the impact of Covid is behind, there is no new risk on the anvil and the balance sheet is stronger than ever with high capitalization (16.8% Tier-1 ratio) and provisioning buffer (90-100 bps of advances). The only monitorable remains the performance of HDB Financial which reported a small loss in the quarter due to spike in delinquencies (GNPL at 5.9%) and upfront provisions taken,” says Mehta.

Bank’s other income stood at 7,443.2 crore during Q3. The four components of other income for the quarter ended December 31, 2020 were — fees and commissions of 4,974.9 crore, foreign exchange and derivatives revenue of 562.2 crore, gain on sale or revaluation of investments of 1,109 crore and miscellaneous income of 797.1 crore.

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