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Last Updated : Jan 21, 2019 09:17 AM IST | Source: Moneycontrol.com

HDFC Bank Q3 review: How should you trade the stock after results?

CLSA, IDBI Capital and Prabhudas Lilladher have raised their price targets on the stock.

 
 
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HDFC Bank’s Q3 performance was largely in line with estimates, but asset quality slipped a bit, analysts have said. CLSA, IDBI Capital and Prabhudas Lilladher have raised their price targets on the stock.

The private sector lender posted a 20.3 percent year-on-year (YoY) growth in its December quarter (Q3) net profit at Rs 5,585.85 crore on strong growth in its net interest income (NII). The bank met the analyst estimates even as provisions rose considerably in the third quarter.

The bank had posted a profit after tax of Rs 4,642.60 crore in the same period last fiscal.

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The net interest income (difference between interest earned and expended) rose to Rs 12,576.75 crore up 21.9 percent YoY. In the year ago, the bank had posted NII of Rs 10,314.3 crore. The core net interest margin for Q3FY19 stood at 4.3 percent.

A Reuters poll of equity analysts had estimated a 20.6 percent increase in the net profit of the bank. It had also estimated a 20.2 percent rise in the net interest income of the bank in Q3.

Here is a gist of what analysts are saying about the lender’s Q3 performance.

Brokerage: CLSA | Rating: Buy | Target: Raised to Rs 2,730 from Rs 2,670

CLSA said that the lender’s profit was in line with estimates, but there was some disappointment on slower CASA growth of 13 percent year on year. While asset quality slipped a bit, stressed loan ratio still remains among lowest in sector. The brokerage sees 21% profit CAGR over FY18-21.

Brokerage: IDBI Capital | Rating: Buy | Target: Raised to Rs 2,500 from Rs 2,380

The brokerage believes that loan growth was healthy at 24% YoY along with stable NIMs of 4.3%. Slippages were a tad higher at 2.1% as against 1.8% last quarter attributable to higher delinquencies in agriculture segment.

Brokerage: Prabhudas Lilladher | Rating: Buy | Target: Raised to Rs 2,371 from Rs 2,310

The lender saw saw strong beat on PPOP due to strong other income (fees/treasury/misc income) and slightly better than expected NII growth of 21.9% YoY.

Overall earnings growth of 20.3% was in-line with estimate as better income was offset by higher contingent provisions for stress emanating from agri loan portfolio from last few quarters on external factors.

“CASA has been slower as bank continues to push granular retail deposit which provides better liquidity cushion but drag on NIMs. Bank continues to deliver 20% CAGR earnings with stable margins, low cost liabilities and strong asset quality which leads us to retain BUY rating,” analysts at the firm wrote in their report.

Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 2,500

Healthy loan growth and improved other income helped the bank report strong results, the brokerage said.

Core fee income grew by 27% YoY led by healthy payments/cash management fees. Treasury gain boosted other income growth by 27% YOY.

“Strong capitalization and liquidity levels should enable the bank to sustain this growth momentum over the next few years. Operating expenses have been under control and digital initiatives have aided consistent decline in the C/I ratio,” the broking firm said in a report.

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First Published on Jan 21, 2019 09:17 am
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