Share bazaar tips: How HDFC Bank Q3 Result is giving you hint that you too can become rich - Here is what you should do

Stock market investment tips: Once again maintaining its best performance, the largest private lender HDFC Bank has surpassed expectations of analysts in December 2018 (Q3FY19) quarter results. The bank earned a net profit of Rs 5,585.9 crore, an increase of 20.3% over the same period a year ago. Also, Net Interest Income (NII) for the quarter grew by 21.9% to Rs 12,576.8 crore, driven by asset growth of 23.7% and a core net interest margin for the quarter of 4.3%. Meanwhile, provisions stood at Rs 2,211.5 crore (consisting of specific loan loss provisions Rs 1,734.6 crore and general provisions and other provisions Rs 476.9 crore). On the other hand, gross NPA stood at 1.38% of gross advances as on December 31, 2018, as against 1.33% as on September 30, 2018 and 1.29% as on December 31, 2017. Coverage ratio as on December 31, 2018 was 70%.

Should you invest in HDFC Bank stocks? 

Analysts at Emkay said, "Overall loan growth remains strong at 24% YoY/4% QoQ, driven by similar growth in the retail/wholesale books. In retail, the bank continues to report strong growth across business segments, except for auto, for which it expects some slowdown in the near term. Slower deposit growth remains a systemic concern; however, HDFCB has been reporting healthy deposit growth rates — 22% YoY/2% QoQ — on strong TD growth, which coupled with falling savings growth across the system, has resulted in a drop in the CASA ratio to 41%."

Furthermore, Emkay stated that "Despite the rising cost of funds, the bank has been able to report strong NIMs of 4.3% on healthy loan/investment yields. It has guided for NIMs with an upward bias due to improving pricing power with banks. Fee growth has been robust too, due to general banking fees and accelerating credit card fees, which now account for nearly 25-30% of core fees."

Going forward, Emkay said, "We expect the bank to report superior RoAs of 1.8-1.9% over FY19-21E, driven by strong loan growth, better margins and improving operating leverage, reflecting the benefits of digitization, increasing Rurbanisation of branches and improving productivity. On the recent management exits happened at the top level, the bank said great leaders have left the bank in the past as well and it did not cause any disruption due to its process-driven business model and strong leadership back-up. The current MD & CEO has indicated his interest in continuing beyond 2020 if the regulatory age bar is raised to 75 years from 70."

Therefore, Emkay adds, "The bank commands well-deserved premium valuations (3.5x FY20E/3.1x FY21 ABV, adjusted for subsidiaries’ valuation of Rs103/125). We maintain our Buy rating, with a revised TP of Rs2,600, implying a core P/ABV of 3.6x FY21 ABV."

Currently, the stock price of HDFC Bank trades near Rs 2,150-level, which makes it a very appealing stock as it is expected to give hefty returns to investors.