Emkay Global Financial's report on HDFC Bank
Despite sector-leading credit growth (~21% yoy), HDFCB reported a slight miss on PAT at Rs100bn (est.: Rs103bn) due to continued weak core profitability (up 10% yoy), which was dragged by weak margins/fees and additional contingent provisions of Rs10bn. Asset quality trended well, with GNPA ratio down 9bps qoq to 1.2%; for HDB Fin, it was down by 200bps qoq to 5%. Retail credit growth (15% yoy/4% qoq) lagged overall credit growth (21% yoy/9% qoq on corporate/commercial credit growth), with the share of retail down to 45%, thus weighing on core margins (~4.1-4.2% down from 4.2-4.3% range). Management argues that the focus is on risk-adjusted margins, which have improved qoq to 3.5% from 3.1%. It expects retail growth to improve, driven by unsecured loans, providing some support to margins. However, we believe that the rising share of mortgages/higher fixed-rate loan book could keep margins in check in the near term.
Outlook
We expect pro forma average RoE for HDFCB (merged) at ~16.6% over FY24-25E, which will still be reasonable vs. large peers. Retain long-term Buy on the stock given recent correction, with it trading at 2.4x standalone FY24E ABV (stripping subs value of Rs78 per share).
More Info
At 17:30 HDFC Bank was quoting at Rs 1,395.35, down Rs 69.50, or 4.74 percent.
It has touched an intraday high of Rs 1,440.00 and an intraday low of Rs 1,390.10.
It was trading with volumes of 493,756 shares, compared to its thirty day average of 467,630 shares, an increase of 5.59 percent.
In the previous trading session, the share closed down 1.90 percent or Rs 28.40 at Rs 1,464.85.
The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,292.00 on 18 October, 2021 and 08 March, 2022, respectively.
Currently, it is trading 19.08 percent below its 52-week high and 8 percent above its 52-week low.
Market capitalisation stands at Rs 773,797.06 crore.
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