HDFC Bank share price falls ahead of Q2 results today; here’s what to expect
HDFC Bank share price traded lower on Monday ahead of the announcement of September quarter results. HDFC Bank, the largest private sector lender in the country, is set to announce its earnings for the second quarter of FY24 today, 16 October, 2023.
HDFC Bank shares opened at ₹1,536.70 apiece on the BSE as compared to Friday’s close of ₹1,536.75. However, the stock witnessed selling pressure and was trading over half a percent lower.
At 9:50 am, HDFC Bank shares traded 0.60% lower at ₹1,527.50 apiece on the BSE.
This will be the first quarterly financial result of HDFC Bank after it was merged with mortgage lender Housing Development Finance Corporation (HDFC) effective July 1.
HDFC Bank’s net profit in Q2FY24 is expected to grow along with the net interest income (NII). However, the lender is expected to be hurt by sharp margin contraction post the merger.
The creation of excess liquidity could affect the net interest margin of HDFC Bank in Q2FY24. However, margins should bounce back in H2FY24 as credit growth picks up and liquidity is utilized, analysts said.
In its quarterly business update, HDFC Bank reported a robust 57.7% growth in its gross advances at ₹23.54 lakh crore as of September 30, 2023, rising from ₹14.93 lakh crore last year.
Its deposits aggregated to approximately ₹21.73 lakh crore in Q2FY24, a growth of around 29.9% over ₹16.73 lakh crore as of September 30, 2022.
Motilal Oswal Financial Services expects HDFC Bank’s margins to moderate sequentially and loan growth to remain in check. Asset quality for the merged entity is expected to increase, while margins are likely to moderate sequentially.
The brokerage expects HDFC Bank’s net profit to grow 39.4% YoY to ₹14,780 crore, while NII to rise 33.6% YoY to ₹28,090 crore.
The bank is expected to post operating profit of ₹22,790 crore, up 31%, YoY.
According to analysts at Prabhudas Lilladher, Gross NPAs could see an improvement of 6 bps QoQ to 1.34% while they expect provisions to remain flat.
“Creation of excess liquidity could affect Q2FY24 NIM, although margins should bounce back in H2FY24E as credit growth picks up and liquidity is utilized. While core earnings growth would be muted for FY24E (3.5% YoY), as NIM and loan growth normalize core PAT may witness a 20.7% CAGR over FY24-26E,” Prabhudas Lilladher said.
NMDC Ltd’s shares have gained 6% in the last three days. This comes on the back of approval of lower royalty rates by the Union Cabinet for mining three minerals—lithium, niobium and rare earth elements —as the government prepares for the auction of these mines. Now, while NMDC does not have a presence in these minerals, it holds a prospecting license to carry exploration activities for lithium reserves in Karnataka. But this is just a sentiment booster and potential contribution to NMDC’s earnings will play out only in the long run. In any case, there has been improvement in NMDC’s outlook.
The state-owned iron ore producer raised lump ore and fines price for the second consecutive month in October by 5-6% to ₹5,200 and ₹4,460 per tonne, respectively.
This is being driven by firm domestic demand for steel as iron ore is a key input used in producing steel.
Moreover, it helps that the global iron ore prices are on a strong footing.
For perspective, the price of China iron ore fines were up by 11% month-on-month in September to $121 per tonne, according to SteelMint.
But the trajectory going ahead depends on how the Chinese economy recovers and if that fuels the demand for steel as the country is an important market for metals.
“We expect NMDC’s iron ore prices to remain stable hereon. The downside risk to the prices appears slim given a likely demand boost in domestic markets post the monsoon season,” said Tushar Chaudhari, an analyst at Prabhudas Lilladher.
On the volume front, NMDC is on track to meet its FY24 target of 47-49 million tonnes.
In the first half of FY24, it clocked sales volume of 20.5 million tonnes, up by 25.5% year-on-year.
In this backdrop, Nuvama Research has raised its estimate for NMDC’s dividend per share to ₹15 for FY24 from ₹7.
The brokerage believes this is quite possible in a pre-election year as NMDC is likely to generate an estimated free cash flow of ₹8,500 crore and ₹5,000 crore in FY24 and FY25, respectively.
To be sure, consistent volume growth is crucial to aid the NMDC stock.
