Should you invest in HDFC Bank shares post Q4 results?

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Brokerages retained their bullish view on HDFC Bank after its posted 18% year-on-year growth in net profit at Rs 8,186.51 crore for the quarter ended March 31. The lender had reported a profit of Rs 6,927.69 crore in the same quarter last year. Net interest income of the bank also increased by 12.60% YoY to Rs 17,120.15 crore, driven by advances growth of 14%, and a core net interest margin of 4.2%.

YES Securities holds ‘Buy’ rating on HDFC Bank with a price target of Rs 1,870, indicating an upside of 34% from the current market price of Rs 1,390.60.

“It is most pertinent to note that bank has maintained core pre-provision operating profit (PPOP) margins around 3.3%, even in challenging circumstances such as retail slowdown driving increase in corporate share before pandemic and tightening of underwriting post the pandemic. HDFC Bank is the least cyclical franchise in our coverage, with structural capability to keep growing at over 15% in the foreseeable future,” YES Securities said.

PPOP grew by 19.90% YoY to Rs 15,532.80 crore. Provisions and contingencies increased by 24% YoY and 37% QoQ to Rs 4,693.70 crore during the quarter under review.

The asset quality of HDFC Bank deteriorated in the March quarter with the percentage of gross non-performing (NPA) assets spiked to 1.32% from 0.81% on QoQ basis. The figure stood at 1.26% in the March quarter last year. On the other hand, the percentage of net NPA also increased to 0.40% from 0.09% on QoQ basis.

Motilal Oswal Financial Services said, “HDFC Bank reported a healthy quarter, with advances growth driven by both corporate and continued revival in the retail segment. Operating performance remained steady, led by robust business growth, stable margins, and controlled opex. The bank continues to make additional contingent provisions to further strengthen the balance sheet amidst the rising covid cases even as asset quality held stable. We expect a 20% annualised profit after tax growth over FY21-FY23E and maintain ‘Buy’ with price target of Rs 1,800.”