New Delhi: HDFC Bank Ltd crossed ₹7 trillion in market capitalisation for the first time on Friday to become India's third firm and first lender to achieve this milestone. The stock has surged 21% so far this year.
So far today, the lender’s shares touched a fresh record high of ₹1283.40 on the BSE. At 9.20 am, the scrip traded at ₹1,280.60, up 0.5% from previous close, with market capitalisation at ₹7.01 trillion.
The Sensex rose 0.4% to 40,443.96 points.
Earlier, Tata Consultancy Services Ltd and Reliance Industries Ltd had achieved this landmark. Currently, RIL is the most-valued company with a market capitalisation of ₹9.32 trillion, followed by TCS with at ₹8.19 trillion.
The HDFC stock has been popular among investors because of strong growth in profitability, stable bad loan ratio and superior deposit franchise credit underwriting and structurally better net interest margin. The recent liquidity crisis has had little impact on its portfolio.
The bank’s net profit increased 26.8% year-on year to ₹6,345 crore for September quarter, compared to ₹6,198 crore consensus estimate of analyst tracked by Bloomberg.
"The Bank continues to deliver consistent performance despite challenging macro environment. We expect the bank to maintain consistency in ROA, with expectations of 2.0% and 2.1% for FY20E and FY21E, respectively," said Elara Capital.
The lender’s asset quality remained stable even as the absolute value of bad loans rose 6% to ₹12,508 crore. Gross non-performing assets ratio stood at 1.38% in Q2 versus 1.4% in the previous quarter. Provisions rose 3% quarter on quarter to ₹2,700 crore.
"Given the general economic slowdown, near term pressure is evident. However, considering the focus on balance sheet growth maintaining superior asset quality, the bank is well poised to deliver consistently with margin leadership & robust return ratios. The bank remains a portfolio stock with premium valuations," said ICICI Direct Research.
HDFC Bank shares are currently trading at a price to book multiple of 4.1x/3.7x on adjusted FY20E/FY21E book value. Analysts expect the premium valuation of the bank to continue owing to its high return on equity, industry leading asset quality metrics and expanding retail franchisee which supports high margin lending opportunities alongside keeping funding costs low.
Among the analysts covering the HDFC Bank stock, 50 have a “buy" rating, five have a “hold" rating, while one has a “sell" rating, according to Bloomberg data.