HDFC Bank shares fall over 2% after Q4 numbers miss D-St estimates. Should you buy or sell?
- HDFC Bank's share price has grown by 2 times in the past three years. Merger with HDFC Ltd to remain in the highlight in the near term.
Shares of HDFC Bank Ltd, India's largest private lender, fell 2.13 per cent to trade at ₹1,656.45 apiece in Monday's opening deals as the bank reported a 19.8 per cent jump in net profit for the January-March quarter, aided by healthy net interest income and robust loan growth.
Standalone net profit for the three months ended 31 March, 2023 was at ₹12,048 crore, up from ₹10,055 crore in the same quarter a year earlier. The net profit however missed street estimates. Analysts had forecast a profit of ₹13,212 crore, according to Refinitiv data.
"Despite strong loan growth (16.9% y-o-y/ 6.2% qoq) and lower credit cost (69bps versus75 bps qoq), HDFC Bank's earnings were below consensus estimates by 3-4% mainly driven by higher opex growth. PAT reported at ₹12,047 crore up by 19.8% y-o-y/ down 1.7% qoq," said analysts at Sharekhan by BNP Paribas.
"For Q4FY23, NII was up 23.7 per cent YoY / 1.6 per cent QoQ while core NIMs on total assets were flat QoQ at 4.1 per cent. Opex continues to be elevated - up 32.6 per cent YoY and 8.0 per cent QoQ. Continued investment in branches and employees led to an elevated opexto-assets ratio of 2.26 per cent and cost-to-income at 42%," said analysts at ICICI Securities.
As a result, ICICI Securities said the operating profit stood at ₹186.2 billion, up 13.8 per cent YoY and down 2.1 per cent QoQ, but lower than the brokerage's estimate of over ₹195 billion. "Lowest credit cost in 6 years at 67 bps largely aided the bank post in-line PAT despite lower-than-expected operating profit. GNPA fell further to a 23-quarter low at 1.12 per cent," the note stated.
What should investors do?
HDFC Bank's share price has grown by 2 times in the past three years. Focus on building distribution capabilities (branch, human resource and technology) is expected to help withstand competition and drive future business growth though merger with HDFC Ltd to remain in the highlight in the near term.
Sharekhan
The brokerage remains positive on bank; however the near-term focus will continue to be on the regulatory relaxations needed for a smooth transition. "Stock trades at 2.8x/2.4x its FY2024E/25E core BV estimates. We maintain our buy rating with an unchanged PT of ₹1920," it said in a note.
ICICI Securities
ICICI Securities has a 'Buy' call on HDFC Bank stock with a revised target price of ₹1,990 based on 3.1 times Sep’24E book from ₹1,874 earlier based on 3.2 times FY24E book.
ICICI Direct Research
HDFC Bank is expected to deliver higher than industry growth with RoA of 2 per cent in FY25E, said analysts at ICICI Direct Research.
The brokerage remains positive on the stock and has retained its 'Buy' rating. "We value HDFC Bank at 2.9 times FY25E ABV & ₹50 for subsidiaries and revise target price from ₹1920 to ₹1970/share," the note stated.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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