What should investors do with HDFC Bank post Q4 result: Buy, sell or hold?

Here is what brokerages have to say on the stock and company after Q4 earnings:

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,735

The company' earnings of Rs 8,186.5 crore saw a 6% miss from our estimates (PLe: Rs 86.8 billion) on higher contingency provisions of Rs 13.0 bn (Rs 8.0 billion for asset quality) and slightly slower NII. Although, PPOP saw a 5% beat led by good other income and controlled opex growth.

The bank remains a strong franchise with solid cross cycle asset quality and superior return ratios.

ICICI Direct | Rating: Buy | Target: Rs 1,700

Focus on business growth with strong revival in retail advances remains positive. Healthy deposit franchise is seen keeping margins at ~4.2%, with a strong recovery in fee-based income and steady operational efficiency to support core performance.

Robust asset quality performance amid tight underwriting standard and contingency buffer of ~60 bps provide comfort against uncertainties in the current environment. Beefing up technology and enhancing digital capabilities is underway to address outage issues.

Dolat Capital | Rating: Buy | Target: Rs 1,800

Large unutilised contingent provision buffers, along with strong capital position and exposure to top-end customers across segments continue to provide significant comfort to earnings profile despite overhang of the RBI ban.

Improving operating metrics and lower tax rates remain key levers for improvement in normalised RoAs, which should inch higher by 20 bps to ~2.1%.

LKP Research | Rating: Buy | Target: Rs 1,666

HDFC Bank is expected to outperform the sector led by 1) healthy growth in operating income, 2) much higher provision then regulatory requirement in the balance sheet, 3) strong capital cushion of 17% at CET1 level and d) best in class underwriting and risk management practices.

Given these strengths we expect HDFC Bank to remain one of the best among all the lending business.

Motilal Oswal | Rating: Buy | Target: Rs 1,800

HDFC Bank has delivered steady growth trends in both loans and deposits, with business activity showing signs of healthy revival across retail segments. CASA trends remain robust, enabling improvement in the CASA ratio to 46%. The bank’s operating performance remains steady, aided by healthy revenue growth, stable margins, and controlled opex.

Sharekhan | Rating: Buy | Target: Rs 1,810

Considering the challenging times, we expect resilience and strong business model will be all the more important, which is what is seen in HDFC Bank’s strong balance sheet and likely higher residual capital than most which are positives. This bank is well capitalised, which ensures that its best-in-class franchise can support an adequately large balance sheet after medium-term challenges.

The bank’s consistency is buoyed by its robust underwriting capability and risk measurement standards, which provide support for valuations. We find management’s indications for stable NIMs and a structurally improving cost-income ratio encouraging, while the high provisioning buffer should provide support to asset quality and profitability.

Yes Securities | Rating: Buy | Target: Rs 1,870

Stringent and high‐quality underwriting in FY21, robust capital position (Tier‐1 17.6%), high core PCR (70% ‐ Covid 1st round stress fully addressed) and a healthy additional provisioning buffer (65 bps of Adv.) makes HDFC Bank’s balance sheet stronger than ever.

Since current lockdowns are localized and less stringent, and job scenario is stronger, the credit cost impact of this pandemic round should be much lesser than the first one (80‐90 bps). The bank has displayed tremendous capability to carve out efficiencies from the cost lines (core C/I at 39% in FY21 v/s 41% in FY20), and most of the gains will be sustained in medium term.

Arihant Capital | Rating: Accumulate | Target: Rs 1,683

HDFC Bank continued with its strong performance despite the challenging environment. With strong asset quality outcome, best-in-class deposit franchise, well cushioned balance sheet, comfortable capital level and gaining market share position, we maintain our positive
outlook on the bank.

We would like to keep an eye on current wave of covid and its impact specially on SME and retail going forward. The RBI’s suspension of new card acquisition due to tech outages remains an overhang for the near term.

Morgan Stanley | Rating: Overweight | Target: Rs 2,000

Company reported strong earnings with improved coverage & capital ratio, while COVID resurgence poses the near-term uncertainty.
Morgan Stanley expect sustained market share gains & further rise in profitability as cycle turns, while earnings estimates remain unchanged.

Credit Suisse| Rating: Outperform | Target: Rs 1,700

There was a robust growth, while asset quality outcomes were in-line. It raise FY22/23 earnings by 4%/1% on slightly lower credit cost. The growth & profitability remain ahead of peers, while there is no visibility on timelines for curbs to be lifted by RBI due to tech issues.

JPMorgan | Rating: Overweight | Target: Rs 1,800

The core performance remains robust, while earnings miss was on contingent provision increase. JPMorgan cut EPS estimate by 9%, but expect the bank to retain a 2% RoA. The expected EPS growth is 19% over FY20-23.

CLSA | Rating: Buy | Target: Rs 1,825

The Q4 results were strong & with pro-forma slippage of just Rs 4,700 crore. The bank portfolio has remained pandemic proof and limited visibility on RBI lifting of ban, which is a near-term constraint.

Jefferies | Rating: Buy | Target: Rs 1,860

The Q4 profit was tad below estimate as higher provisions offset operating profit a beat. The retail lending momentum has normalised and CASA growth of 27% YoY is a key positive.

The slight rise in cheque-bounce rate in April is a concern. It tweak earnings a bit with 18% profit CAGR over FY21-24.

At 09:25 hrs, HDFC Bank was quoting at Rs 1,384.20, down Rs 44.25, or 3.10 percent on the BSE.

The share touched a 52-week high of Rs 1,650 and a 52-week low of Rs 826 on 24 February, 2021 and 19 May, 2020, respectively.

Currently, it is trading 16.11 percent below its 52-week high and 67.58 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.