HDFC Bank share price target raised on strong Q4 results, what top brokerages say

HDFC Bank share price: After India’s leading private lender HDFC Bank reported record profits for Q4, brokerage firm CLSA has raised HDFC Bank share price target. The bank has reported a 20.27% on-year growth in net profit to Rs 4,799.28 crore, driven by stable asset quality. The bank had posted a net profit of Rs 3990.09 crore for the corresponding quarter last year. Taking stock of the reported results, CLSA said that the key positive was the 25% growth in operating profit. HDFC Bank’s net interest margin — a key measure of profitability — in Q3 remained unchanged at 4.3% from the end of December 2017 and March 2017.

According to CLSA, the proposed Rs 25,000 crore capital raising can life overall growth. HDFC Bank shares were trading flat at Rs 1,944 on Monday morning. CLSA has raised the target price on the shares to Rs 2,470 from Rs 2,340 earlier. The firm’s target price implies an upside of 27% from the current market prices. Bobcaps said that the bank is well capitalised for 21% CAGR advances in from FY18-20. The research firm expects valuations to sustain supported by robust core earnings. IDFC Securities said that Q4 net profit growth if 20% is in-line with expectations. However, the firm notes that agriculture slippages remain high, as provisions of Rs 255 crore was created for the quarter under review.

Notably. The asset quality has remained stable with a 1 basis point (bps) rise in gross non-performing assets (NPAs) ratio — bad loans as a percentage of total loans — to 1.3% in Q4 FY18. However, on a y-o-y basis, the gross bad loan ratio rose 25 bps. The net interest income (NII) rose 17.70% on-year to Rs 10,657.71 crore from Rs 9,055.10 crore a year ago.

Notably, apart from improving the financial results, the bank’s board has also recommended a dividend of Rs 13 per equity share of Rs 2 for the year (650 per cent) ended March 31, 2018, as against, 11 per equity share of Rs 2 for the previous year. This would be subject to approval by shareholders at the next annual general meeting.

HDFC Bank