Shares of HDFC Bank surged nearly 3% in early trade on Monday after the country’s largest private sector lender (in terms of market capitalisation) reported better than expected earnings in June quarter of FY25. Overall, the Sashidhar Jagdishan-led bank put on a good show in June quarter, aided by better interest income, operating expenses, and lower provisions.
Cheering Q1 numbers, HDFC Bank shares opened higher at ₹1,615.05, up 0.5% at ₹1,615.05 on the BSE, snapping four sessions losing streak. In the first two-hour of trade so far, the banking heavyweight rose as much as 2.7% to ₹1,650.75, while the market capitalisation climbed to ₹12.53 lakh crore.
Driven by robust Q1 numbers, HDFC Bank shares were back in green today after falling over 1% in the past four sessions as investors booked profit at higher levels.
Earlier this month, the share price of HDFC Bank hit its 52-week high of ₹1,791.90 on July 3, 2024, rebounding 31% from its 52-week low of ₹1,363.45 touched on February 14, 2024. In the calendar year 2024, the stock has fallen 3.5%, while it dropped over 2% in the past 12 months. In the last six months, the counter rallied nearly 15%, whereas it fell nearly 2% in a month.
HDFC Bank released its June quarter earnings on Saturday, posting 33.17% year-on-year growth in consolidated net profit at ₹16,474.85 crore as compared to ₹12,370 crore on a consolidated basis in the year-ago period. On the sequential basis, the profit dropped by 2% compared to ₹16,511.9 crore in the preceding January-March quarter of FY24.
The private lender’s total income rose 44.77% to ₹83,701.25 crore in Q1 FY25 from ₹57,816.67 crore in the corresponding period last year. On a quarter-on-quarter (QoQ) basis, the income was up 6.62%.
The net interest income (NII), the difference between interest earned and paid, stood at ₹29,837 crore in Q1 FY25, up 26.4% from the year ago period, aided by robust growth in advances. Sequentially, NII grew 2.6% from Q4 FY24. Net interest margin improved to 3.47% as compared to 3.44% in March quarter of FY24.
The lender’s provisions were down 9% YoY to ₹2,602 crore in Q1 FY25, while it dropped significantly by over five times from ₹13,511 crore in Q4 FY24.
On the asset quality front, the bank’s gross non-performing asset (NPA) ratio increased by 9 basis points (bps) sequentially to 1.33% in Q1 FY25. Similarly, net NPAs also rose by 6 bps to 0.39% during the June quarter of the current fiscal.
Analysts view on HDFC Bank Q1
Post Q1, JM Financial has maintained ‘BUY’ call on HDFC Bank shares with a revised target price of ₹1,950 (valuing core bank at 2.3x FY26E BVPS and subsidiaries being valued at ₹218/share). The brokerage in its report says that Q1 numbers reflected slower growth momentum on headline business (0.9% QoQ loans, flat QoQ deposits) but core parameters (reported NIMs at 3.5%, +6bps QoQ; GNPA at 1.33%, +8bps QoQ) remained stable.
“Deposit accretion trajectory and loan-to-deposit ratio (LDR) reduction will remain an overarching factor w.r.t HDFC Bank valuations in the near-term. This is likely to result in slightly slower loan growth than past trends as the bank balances growth vs profitability while implementing a balance sheet course correction (amidst a challenging deposit environment in the system),” it says.
Motilal Oswal has reiterated ‘Buy’ call on HDFC Bank with a target price of ₹1,850, citing in-line performance, characterised by slight margin improvement and controlled provisions. “We estimate HDFCB to deliver an FY26E RoA/RoE of 1.9%/15% and reiterate our BUY rating on the stock with a TP of ₹1,850 (premised on 2.3x FY26E ABV + INR256 for subsidiaries).”
Another domestic brokerage Prabhudas Lilladher retained ‘Buy’ on the stock and maintained target price at ₹2,000. “We expect NIM for FY26E to increase by 12bps YoY to 3.67%. Bank suggested that decline in LDR could be faster, and hence, we cut loan growth by 2% each in FY25/26E. Factoring deposit CAGR of 16%, LDR is likely to reach 94% by FY26 end (earlier 96%),” it says in a note.
The brokerage says that priority sector lending (PSL) requirement would be a key monitorable that could affect core PAT going ahead.
Axis Securities also maintained a ‘Buy’ recommendation on the stock with a price target of ₹1,950. “We value the core book at 2.4x FY26E ABV vs. its current valuation of 2.2x FY26E ABV and assign a value of ₹220/share to subsidiaries, thereby arriving at a target price of ₹1,950/share, implying an upside of 21% from the CMP.”
The agency has trimmed its advances growth estimates by 2-4% over FY25-27E, factoring in a slowdown in credit growth amidst challenges on deposit mobilisation. It also cut earnings estimates by 5-6% over FY25-26E, owing to slower growth and a gradual improvement in NIMs.
(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)
Leave a Comment
Your email address will not be published. Required field are marked*