HDFC Bank shares: Motilal Oswal sees 15% upside after Q4 results, do you own it?
Brokerage firm Motilal Oswal has recommended ‘buy’ on private lender HDFC Bank reported March quarter results which was ‘in-line quarter with healthy growth in NII, robust asset quality ratios.
In its report, Motilail Oswal noted that HDFC Bank saw healthy growth in NII in Q4 even as margins remained stable, while core pre-provision operating profit (PPoP) growth remained modest. It further added that the loan growth was driven by sustained momentum in the retail segment and robust growth in commercial and rural banking.
The brokerage has recommended ‘buy’ rating with a target price of Rs1,950 implying a 15 per cent upside potential from its current levels.
On Thursday, the shares of HDFC Bank closed 0.51 per cent up at ₹1,693.30.
Leading private sector lender, HDFC Bank on Saturday posted 19.8% growth year-on-year in net profit to ₹12,047.5 crore for the fourth quarter ending March 31, 2023 (Q4FY23). Net interest income (NII) jumped by 23.7% to f 23,351.8 crore in the quarter under review. The bank showed healthy growth in deposits and credit, while provisions dropped steeply in Q4. Also, the bank’s asset quality continued to be stable.
On the top-line front, the bank posted NII which is the difference between interest earned and interest expended, at ₹23,351.8 crore in Q4FY23 — rising by 23.7% from ₹18,872.7 crore for the quarter that ended March 31, 2022. The core net interest margin was at 4.1 % on total assets, and 4.3% based on interest-earning assets.
“We uphold our earnings projection and estimate a 19% PAT CAGR over FY23-25, with RoA/RoE at 2.0%/17.7% in FY25. A potential pick up in margins and progress on the merger would be the key monitorables. We reiterate our Buy on the stock,” said Motilal Oswal.
“HDFCB reported an in-line quarter with healthy growth in NII, even as margins remained stable, while core PPoP growth remained modest. Loan growth was driven by sustained momentum in the Retail segment and robust growth in Commercial and Rural Banking. Asset quality ratios remained robust, while the restructured book moderated to 31bp of loans. Healthy PCR and a contingent provisioning buffer should support asset quality,” it added.
In 2023, the stock has risen by over 3 per cent, while the past one year the stock has gained over 7 per cent.
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