NEW DELHI: HDFC Bank dropped over 3 per cent on Monday even as the lender reported 20 per cent growth in fourth quarter net profit, which largely came in line with market expectations.
The stock fell 3.37 per cent to hit a low of Rs 1,894.85 before recovering a bit. Analysts largely remained positive on the stock and retained their target prices.
Edelweiss Securities said the best-in-class liability franchise, expansion of rural/semi-urban branches and improvement in productivity owing to digital focus will ensure the bank delivers above-industry earnings growth — over 25 per cent CAGR over FY18-20E. It has maintained its target price of Rs 2,454, valuing the bank at 4 times FY20E P/ABV.
The bank on Saturday posted 20.27 per cent year-on-year growth in net profit at Rs 4,799.28 crore — its highest ever quarterly profit for the January-March quarter — driven by stable asset quality. Net interest income (NII) increased 17.70 per cent yoy to Rs 10,657.71 crore during the quarter, from Rs 9,055.10 crore a year earlier.
Asset quality remained stable as the percentage of gross non-performing assets (NPA) came in at 1.30 per cent against 1.29 per cent on a sequential basis and 1.05 per cent a year earlier.
Nirmal Bang Institutional Equities noted that annual deposit traction growth at 22.5 per cent came in strong. This was on top of solid fee income growth and traction in retail loan (despite significant home loan origination being ceded to parent). "We have marginally modified our estimates for FY19/FY20 and have retained a Buy rating on HBL, retained our target price of Rs 2,301 and valuing the stock at 4.1x FY20E P/BV," the brokerage said.
Percentage of net NPAs as of March-end stood at 0.40 per cent compared with 0.44 per cent at December-end.
Provisions and contingencies increased 22.13 per cent to Rs 1,541.10 crore during the quarter under review. The figure stood at Rs 1,261.80 in the same quarter last year.
Operating expenses have been under control, and significant digital initiatives have led to a consistent decline in the cost-to-income to 40 per cent. "We have built in Rs 24,000 crore of capital raise in FY19 and arrive at a target of Rs 2,400 at 4 times Mar-20E ABV for the bank," said Motilal Oswal Securities in a note.
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