Trading On margin

What makes analysts see a new high of 52 weeks for HDFC Bank after the second quarter results?

On Saturday, HDFC Bank reported 22.30% year-over-year growth in consolidated net profit for Q2FY23, to 11,125.21 crore as opposed to 9,096.19 crore in the same quarter last year. Autonomous net profit of the largest private sector bank jumped around 20% year-on-year to reach 10,605.78 crores of 8,834.31 crores in the same period last year. On Friday, shares of HDFC Bank closed on the NSE at 1,446.00 each, up 3.76% from the previous close of 1,393.60. In its last trading session, the stock recorded total volume of 6,424,960 shares compared to the 20-day average volume of 6,448,808 shares. The stock had hit a 52-week high of 1,725.00 on (October 18, 2021) and a 52 week low of 1,271.60 on (Jun 17, 2022), indicating that at the current market price, the stock is trading 16.17% below the high and 13.71% above the low. However, in light of HDFC Bank’s impressive second quarter results, research analysts from various brokerage firms have set a target price of 1800 for the title, which could represent a new high.

Research analysts at brokerage firm Sharekhan said, “HDFC Bank delivered strong business performance in Q2FY2023 in terms of loan growth as well as deposit growth on a year-over-year basis. The trend also remained healthy on a sequential basis. Retail lending growth remained flat, while the commercial and corporate banking segments saw strong traction and will likely support PPPO growth. We expect the margin trajectory to gradually recover in fiscal 2023, while steady growth in retail lending will support fee income. The growth trend in deposits also remained strong. The loan-to-deposit ratio improved to 88.4% from 86.9% quarter-on-quarter and 85.2% year-on-year. The bank purchased loans totaling Rs 91.5 billion in 2QFY2023, through direct assignment, under a home loan agreement with HDFC Ltd.”

They claimed in their research report that “We maintain our Buy rating with an unchanged PT of Rs. 1,800. We believe that HDFC Bank is on an accelerated growth trajectory with strong growth in advances, driven by segments retail, MSMEs and corporates, as well as sound mobilization of low-cost deposits. The bank’s continued strengthening of its digital capabilities and franchise network bodes well for future growth. The stock has underperformed its peers over the past 12 months. The bank is well capitalized and has the ability to manage the quality of its assets through cycles and deliver superior yield ratios regardless of economic cycles and seize opportunities from any upturn in the economy. coming. The stock is currently trading at 2.7x and 2.3x its base ABV FY2023E and FY2024E, respectively.”

Research analysts at brokerage firm Emkay Global Financial Services Limited said: “We believe HDFCB will be the main beneficiary of buoyant credit markets, given its strong retail orientation as well as its growing inclination towards business growth. However, a positive regulatory stance on the impending merger structure and managing the merger without too much disruption will be essential for the reassessment. Currently, the stock is trading at 2.4x FY24E ABV (ex-subs valuation). We maintain our BUY rating on the stock, with a TP of Rs1,800/share (3.0x Jun-24E ABV + Rs78 undervaluation), given healthy yield ratios, strong capital comfort and reasonable valuations.”

Research analysts at brokerage firm Motilal Oswal said, “HDFCB reported a stable quarter with a resumption of Core PPoP growth and margins, although the loss of cash drove the PPoP. Loan growth was driven by continued momentum in the retail segment, as well as robust growth in commercial and rural banking as well as wholesale lending. Asset quality ratios remained robust, while the restructured portfolio moderated to 53 basis points of lending. A healthy PCR and eventual provisioning buffer provided reassurance on asset quality. We estimate that HDFCB will deliver approximately 19% CAGR PAT in FY22-24, with a RoA/RoE of 2.0%/17.2% in FY24. Hold BUY with a TP of INR 1,800 (based on 3x FY24E ABV). We expect the stock to perform gradually as revenue and margin recover further while merger-related surplus declines as HDFCB seeks to complete the merger by 1Q/2QFY24E.”

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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