HDFC Bank shares fall on tepid Q1 results; should you buy or sell stock?

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Published: July 23, 2018 12:10:30 PM

India's largest private sector lender HDFC Bank shares fell in the morning trade, following tepid Q1 results reported this Saturday. We take a look at whether you should buy or sell shares.

Shares of India’s major private sector lender HDFC Bank fell in the morning trade, following Q1 results reported this Saturday. The country’s largest private sector lender in terms of market capitalisation, has recorded an 18.2% on-year rise in its Q! net profit at Rs 4,601.44 crore missing expectations on the back of lesser than expected growth in interest income.  Earlier, a Reuters poll had indicated that the bank will post a 23% rise in its June quarter net profit to Rs 4,785.3 crore on stable asset quality and interest income. The Bank’s total income for the quarter ended June 30, 2018 came in at Rs 26,367 crore implying a healthy growth of nearly 19% from 22,185.4 crore for the quarter ended June 30, 2017.

HDFC Bank shares fell to Rs 2,138.05 a fall of more than 1% in the morning trade. Taking stock of the results, global research firm Morgan Stanley said that headline numbers were mainly affected by bond provisions. The firm has an overweight rating on HDFC Bank shares, with a target price of Rs 2,570. The target price implies an upside of more than 20% from the current market prices. High loan growth in the quarter, along with inexpensive valuation keep Morgan Stanley positive on the shares. The firm noted that the balance sheet remains strong.

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Jefferies said that NII (Net Interest Income) growth trajectory weakened to a low point last witnessed in FY14. Notably, the net interest income grew by 15.4% to Rs 10,813.6 crore, from Rs 9,370.7 crore for the quarter ended June 30, 2017, driven by asset growth and a net interest margin for the quarter of 4.2%.

In its report, the firm said that asset quality has remained stable. Gross non-performing assets were at 1.33% of gross advances as on June 30, 2018, as against 1.30% as on March 31, 2018 and 1.24% as on June 30, 2017. Jefferies has a target price of Rs 2,530 on the shares. Jefferies’ target price implies an upside of more than 18% from the current market prices. The firm noted that agriculture contributed to 18% of overall slippages.

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