What should you do with HDFC Bank stock post Q4 earnings?

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The bank’s standalone profit grew 18.2 percent year-on-year to Rs 8,186.5 crore for the quarter ended March 2021. Net interest income (NII) grew 12.6 percent to Rs 17,120.15 crore in Q4FY21, compared to Rs 15,204.06 crore in the year-ago period.

HDFC Bank reported an 18.2 percent year-on-year (YoY) growth in its standalone profit at Rs 8,186.5 crore for the quarter ended March 2021 (Q4FY21) on account of low base in the corresponding period. The profit in Q4FY20 stood at Rs 6,927.69 crore. Net interest income (NII), the difference between interest earned and interest expended, grew 12.6 percent to Rs 17,120.15 crore in Q4FY21, compared to Rs 15,204.06 crore in the year-ago period, driven by credit growth of 14 percent, and core net interest margin of 4.2 percent for the quarter.

HDFC Bank reported an 18.2 percent year-on-year (YoY) growth in its standalone profit at Rs 8,186.5 crore for the quarter ended March 2021 (Q4FY21) on account of low base in the corresponding period. The profit in Q4FY20 stood at Rs 6,927.69 crore. Net interest income (NII), the difference between interest earned and interest expended, grew 12.6 percent to Rs 17,120.15 crore in Q4FY21, compared to Rs 15,204.06 crore in the year-ago period, driven by credit growth of 14 percent, and core net interest margin of 4.2 percent for the quarter. Here is what brokerages are suggesting:

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.

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

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

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

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%.

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

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.

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

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.

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

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.

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

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. 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.

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

Rupee

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

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.

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

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.

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

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.

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

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.

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

Rakesh Patil

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