India: HDFC Bank, Infosys Ltd and more

• HDFC Bank’s (HDFCB) Q4FY22 earnings performance stood below our and consensus estimates with NII growth disappointing despite a healthy loan growth.
• Loan growth was robust at 21/9% YoY/QoQ supported by healthy growth in the Commercial & Rural Banking (+31% YoY) and Corporate Book (+17% YoY)
• We maintain our BUY recommendation on the stock with a revised target price of Rs 1,960/share derived using the SOTP method (core bank at 3.4xFY24E ABV + Subsidiaries value Rs 75/-), implying an upside of 34% from the CMP

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• HDFC Bank reported earnings growth of ~23% YoY, mainly driven by lower provisions.
• Operating profit growth was subdued at 5.3% YoY on account of multiple factors: (1) lower NII growth due to NIM compression (2) treasury losses (vs. gains in previous periods) due to increase in yields (3) investments in branches, human capital and technology.
• Loan book growth was strong at ~21% YoY, driven by commercial/rural and wholesale banking…(continued).

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• Infosys 4Q disappoints; Downgrade cycle upon us sooner than expected (INFY) reported US$4,280mn revenue for 4QFY22 (below our estimate of US$4,407mn) reflects ~1.2% growth QoQ in CC terms against our estimate of 4.3%.
• EBIT margin at ~21.5% (our estimate: ~23%) declined by 200bps QoQ.
• INFY attributed this weakness in revenue to seasonality (fewer working days), Covid impact and a one-off issue connected with a certain client (~100bps)…(continued).

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• Infosys Ltd (Infy) reported Q4FY22 revenue of Rs 32,276 Cr, up 1.3% QoQ and 0.8% QoQ (in CC terms) which was below our expectations.
• The company’s operating profit stood at Rs 6,956 Cr, reporting a de-growth of 7.3% on a QoQ basis.
• We recommend a BUY rating on the stock and assign a 29x P/E multiple to its FY24E earnings of Rs 71/share to arrive at a TP of Rs 2,060/share, implying an upside of 18% from the CMP.

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• Q4FY22 operating performance missed our expectations.
• Revenues grew by a mere 1.2% QoQ CC, while EBITM declined 190bps to 21.6%.
• Operating performance remained weak due to seasonality, a Covid-related impact in the early part of the quarter and a clientrelated contractual provision (likely to be recovered in FY23).

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• INFO reported a weak growth of 1.2% QoQ CC, below our estimate of 2.8%, on account of seasonality, the impact from the COVID-19 pandemic, and client provisions.
• Large deal TCV of USD2.3b was a tad soft (net new at 48%).
• However, the management indicated good traction in its large deal pipeline and reiterated that the demand remains strong

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