Buy HDFC @ target of Rs. 2423 : ICICI Securities

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ICICI Securities research report on HDFC

HDFC has strengthened its balance sheet further with recent capital raise (shoring up tier-1 to 19.5%) over and above provisioning buffer of 2.64% of AUM and excess liquidity (at >5% of balance sheet).

While movement from Morat 1.0 to Morat 2.0 has not been overwhelming (higher print at 16.6% for retail and 39% for non-retail) due to request-based disclosure approach (not collection efficiency), flow into restructuring will still be restricted.

Similar to actions in Q4FY20, HDFC might proactively prefer recognising non-Covid stress upfront (rather than restructuring). Disbursement trends MoM (>80% in July) suggest normalisation in a couple of months and start of growth phase post Q3FY21.

Factoring-in the recent capital raise, we revise our EPS and BV upwards by 10%/1% and 12.7%/13.4% respectively for FY21/FY22.

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