HDFC Bank Shares: HDFC Bank shares continued the downward journey on Tuesday by plunging more than 2 per cent to Rs 1,362 apiece on the BSE, marking its ninth straight session of loss. The bank’s stock is down about 9 per cent as compared to a 3 per cent fall in benchmark Sensex in the last five trading sessions.
HDFC Bank’s Q4 results came below estimates. The private lender reported a 23 per cent jump in Q4 standalone net profit, led by lower provisions, even as other metrics like net interest income (NII) came in below expectations.
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Earlier this month, Mortgage financier Housing Development Finance Corporation announced that it will merge with its subsidiary HDFC Bank, creating a financial behemoth. The merger is subject to regulatory approvals.
Should Investors Buy The Dip?
“HDFC Bank and HDFC Ltd. have fallen more than 20 per cent from their respective highs post-merger news. HDFC Bank’s results were below expectations due to pressure on NIMs. However, we believe that the strong liability fortress of the bank and asset quality record is a huge competitive advantage over its peer banks. We believe that the merger is positive for both entities in the long run. Thus, we suggest investors buy HDFC twins on dips to play on the private capex revival, economic growth,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
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“Post-merger announcement and Q4 results the stock has overreacted and is trading down from last few days. Overall Q4 numbers were not so bad with healthy loan growth in all the segments supported by improved asset quality. Considering all the factors like merger benefits and MSCI Index adjustment, we recommend investors to use these dips to accumulate HDFC Bank,” said Prashanth Tapse, Research Analyst and VP Research at Mehta Equities.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said: “There are some concerns regarding the marginal hit to profitability of the merged entity due to higher SLR and CRR requirements. (HDFC Ltd doesn’t have statutory requirements like SLR and CRR) But the weakness in HDFC twins after the merger announcements is due to sustained selling by FPIs and shorting by speculators exploiting the FPI positioning in the stocks. From the valuation perspective HDFC twins are attractively valued, the short-term technical weakness not withstanding”
According to Emkay Global, despite sector-leading credit growth (21 per cent yoy), HDFC Bank reported a slight miss on PAT at Rs100 billion (est.: Rs 103 billion) due to continued weak core profitability (up 10 per cent yoy), which was dragged by weak margins/fees and additional contingent provisions of Rs10bn. “Asset quality trended well, with gross non-performing asset ratio down 9bps qoq to 1.2 per cent; for HDB Fin, it was down by 200bps qoq to 5 per cent,” the brokerage has said.
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The broking firm has suggested buying the stock of HDFC Bank for a price target of Rs 1,950, which implies an upside of almost 37 per cent from current levels of Rs 1399.
