Multibagger alert! CLSA gives buy rating on HDFC Bank; seen rising over 24% ahead

Since the time private lender HDFC Bank has presented its Q4FY19 result, the share price on Dalal Street has corrected significantly. In just four days, gains in HDFC Bank has been only 2%. After touching an intraday high of Rs 2298.80, the bank was now trading at Rs 2292.40 per piece, up by Rs 11.85 or 0.52% at around 1231 hours. Guess what! You can grab the opportunity offered by HDFC Bank's slow stock movement! Why? It is seen rising by 24%. In fact, post Q4FY19, CLSA has given a buy rating on the bank with a target price of Rs 2,850 ahead.

CLSA said, "HDFC Bank’s profit for 4QFY19 grew 23% YoY to Rs59bn, ahead of estimates aided by lower provisions which compensated for a slight OPmiss. We were tad disappointed by the slower rise in its core retail segments: Casa deposits were up just 14% YoY due to a slower rise in savings deposits, retail loans rose by just 19% and fee growth slowed to 9%."

"An uptick in Casa will be key to loan-growth and margins next year," says CLSA. Further the rating agency added, "We were encouraged to see better rise in its debit card base and a higher spread on corporate loans. Asset quality was stable, but we would watch out for trends in unsecured retail and business banking where management slowed to test asset quality."

For outlook ahead, CLSA says, "FY19 was a tad weaker for subsidiaries and HDB-FS may look to raise capital over the 12-18 months. We see a 21% profit Cagr over FY19-21CL. We roll-forward our target price from Rs2,730 to Rs2,850 and maintain our BUY recommendation."

In Q4FY19, HDFC Bank posted a 22.6% increase in net profit to Rs 5,885.1 crore in Q4FY19, after providing Rs 3,069.3 crore for taxation. Net Interest Income  came in at Rs 13,089.5 crore higher by 22.8% compared to Rs 10,657.7 crore for the quarter ended March 31, 2018, driven by average asset growth of 19.8% and a core net interest margin for the quarter of 4.4%.