HDFC Bank stock gains over half a percent today after Q1FY24 earnings beat estimates

HDFC Bank stock jumped nearly half a percent on Monday after the bank’s PAT grew to Rs 11,950 crore in Q1FY23 compared to Rs 9,196 crore in Q1FY23.

HDFC Bank share price rose 0.65% to Rs 1,655.95 today after the bank’s profit after tax (PAT) grew 29.9% on-year to Rs 11,950 crore in Q1FY24 compared to Rs 9,196 crore in Q1FY23. This beat Bloomberg’s estimate of Rs 11,375 crore. NII rose 21.1% to Rs 23,599 crore in Q1FY24 vs Rs 19,481 crore in Q1FY23. This is HDFC Bank’s first earnings results following its merger with HDFC Ltd. HDFC Bank stock has risen 4% in the last one month and over 22% in the past one year.

The bank’s gross non-performing asset ratio rose 5 basis points sequentially to 1.17%. Net NPA rose to 0.3% as of June 30 compared with 0.27% as of March 31. The provisions for the quarter fell 10.2% on-year to Rs 2,860 crore. Meanwhile, HDFC Bank and HDFC Ltd merger took place earlier this month. The combined entity saw its advances rise 13% on-year as of June 30 to Rs 22.45 lakh crore, according to a July 5 exchange filing. HDFC Bank has allocated over 311 crore fresh shares of the bank to shareholders of the merged entity HDFC Ltd, according to a July 14 stock exchange filing by the bank.

“India’s largest private sector lender, HDFC Bank Ltd., reported decent Q1FY24 results, with net profit beating market estimates. However, there was some visibility of weak NII and asset quality wherein the bank’s NII missed market estimates and NPAs rose marginally on a sequential basis. The improvement in profitability was on account of lower provisioning and growth in other income which had trading and mark-to-market gain and recoveries. Though advances and deposits were marginally higher on a sequential basis, we feel that the merged entity will further improve the performance going forward,” said Shreyansh Shah, Research Analyst, StoxBox.

Shreyansh Shah expects the subdued performance of NIMs in the current quarter to not continue going forward as there will be an improvement in NIMs on account of the merger which took effect from July 01, 2023. Also, the subsidiaries like HDFC Life, HDFC AMC and HDFC Ergo which were erstwhile subsidiaries of HDFC Ltd will have huge distribution leverage as they are now the subsidiaries of HDFC Bank. These subsidiaries will get the benefits of the bank’s 8,500 branches plus the addition of 1,500 branches every year, thereby increasing the SOTP value of HDFC Bank. 

Pre-result call on merged stock

Analysts at JP Morgan, on July 11 said in a report that the brokerage estimates the merged entity to deliver a 17% EPS CAGR over FY23-25E, driven primarily by a 16% loan CAGR estimate. “Following a period of restriction, we are moving to an OW rating and a Mar-24 PT of Rs 2,000 (OW rating/Mar-23 PT of Rs 2,100 prior to restriction) from a Not Rated designation. We estimate ROA for the bank to be maintained at 2%. Mar-24 PT is SOTP-based with parent bank valued DDM basis, implying F24 P/B and P/E of 2.6x/17x,” JP Morgan said prior to the results announcement.

HDFC Bank shares touched a 52-week high of Rs 1,757.80 on 03 July 2023 and a 52-week low of Rs 1,338.30 on 19 July 2022. At the current market price of Rs 1,671.80 per share, the company’s market capitalisation stands at Rs 12.59 lakh crore. Today, HDFC Bank shares touched an intraday high of Rs 1,674.8 and a low of Rs 1,633.15.