HDFC Bank, the country's second largest private sector lender, reported a strong set of numbers for the quarter ended March 2019 driven by healthy loan growth.
The stock was marginally in the green at Rs 2,292.05, up 0.08 percent at the time of publishing this copy. It has gained 7 percent in the last three months.
Its profit in Q4 increased a whopping 22.62 percent year-on-year to Rs 5,885.12 crore while net interest income grew 22.8 percent to Rs 13,089.5 crore driven by average asset growth of 19.8 percent.
The bank registered a healthy credit growth of 24.5 percent in Q4 with the total loan book at Rs 8,19,401 crore.
Brokerages were positive on the stock and some of them increased their price target after the Q4 earnings.
Brokerage: CLSA | Rating: Buy | Target raised to Rs 2,850 | Return: 24 percent
While maintaining buy call and raising price target to Rs 2,850 from Rs 2,730 earlier, CLSA said the uptick in CASA is key to growth and profitability.
Profit was ahead of estimates aided by lower provisions, the brokerage said, however, it was disappointed by the slower rise in its core retail segments. It advised to watch out for trends in unsecured retail and business banking.
The brokerage said that though FY19 was a tad weaker for subsidiaries, it sees a 21 percent profit CAGR over FY19-21.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 2,700 | Return: 18 percent
Credit Suisse maintained its outperform rating on the stock with a target price at Rs 2,700 apiece after strong 23 percent earnings growth on the back of continued loan growth momentum.
Bank remains adequately capitalised to support pick-up in growth and digitisation gains continue to accrue, it said.
Core cost-income ratio has seen 200 bps YoY improvement in FY19.
Brokerage: Morgan Stanley | Rating: Overweight | Target raised to Rs 2,700 | Return: 18 percent
With an overweight call on the stock, Morgan Stanley increased its price target to Rs 2,700 from Rs 2,550 as lender's profit was 2 percent ahead of its estimates, helped by strong loan growth.
Morgan Stanley highlighted that the bank's fee growth has slowed down to 11 percent, causing core pre-provision operating profit to slow to 22 percent. With LCR trending down, liability growth remains the key constraint, it said.
Brokerage: Kotak Institutional Equities | Rating: Add | Target raised to Rs 2,400 | Return: 5 percent
Kotak Institutional Equities also raised price target to Rs 2,400 from Rs 2,350 while retaining add rating on the stock.
Kotak said though there were a few misses, strong earnings momentum maintained for the quarter. FY20 could see a few headwinds if Q4 trend persists, it said. Kotak forecasts a 20 percent earnings CAGR for FY19-21.
The brokerage expects return on equity in the range of 16-17 percent over FY19-21.
Brokerage: Prabhudas Lilladher | Rating: Buy | Target raised to Rs 2,700 | Return: 18 percent
Bank has been able to retain superior NIMs on a well-managed portfolio mix but liabilities seem to be a challenge in near term, Prabhudas said, adding, it is keeping an eye on the cost of funds.
Structurally, the bank continues to deliver 20 percent CAGR earnings with better margin profile and strong asset quality, that has led Prabhudas to retain buy rating with a revised target price of Rs 2,700 (from Rs 2,371) as we roll forward to Mar-21 ABV based on 3.9x multiple.
Brokerage: Emkay | Rating: Buy | Target: Rs 2,750 | Return: 20 percent
Emkay said it estimates return on asset/return on equity of 1.9/17-18 percent over FY20/21E, mainly due to the bank's superior margins and improving operating leverage. It maintains buy with a target price of Rs 2,750, based on 3.9x FY21E standalone ABV and subsidiary valuation of Rs 118.Disclaimer
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