HDFC Bank had just released its first quarter earnings, which looks like this:

HDFC Bank Q1 – 2017 Q4 – 2016 Q1 – 2016 %Change Q-Q % change Y-Y
Total Income 19,322.63 18,862.61 16,502.97 2.44% 17.09%
Net Interest Income 7,781.44 7,453.34 6,388.77 4.40% 21.80%
Net Profits 3,238.91 3,374.22 2,695.72 -4.01% 20.15%
Deposits 573,754.53 546,424.19 484,174.38 5% 18.50%
Loan Book (Credit ) 470,622.47 464,593.96 382,010.41 1.30% 23.20%
Gross NPA 4,920.89 4,392.83 3,652.23 12.02% 34.74%
Net NPA 1,493.39 1,320.37 1,027.70 13.10% 45.31%


To summarise the above table, on Q-Q basis this might be the worst quarterly result where the profits had fallen down by 4%. This is because of the 12% growth in gross NPA’s and bank had to provision them adequately. If it was not the HDFC Bank, then the above results look good.

The other concern is growth in its ‘Advances’ on quarter on quarter basis, which had stayed tepid at 1.30%. It will be interesting to hear the commentary from the management to know whether this tepid growth is because of the extra precaution they are taking from their end or is it because of the market condition.

Most of the analyst were expecting its earnings to grow in range of 16% – 22% this financial year and they have reported within that range. But is it market going to revalue its share prices? As it is very clear that to repeat 30% earnings growth every year looks not real in today’s world.

If we look at the share prices today at Rs 1,220, they are still reflecting a growth of 30% in its earnings, we calculated its 2018 intrinsic value band in range of Rs 845 – Rs 980 per share.

What do you think?

Should we still pay that premium to acquire these stocks or you believe that this premium will fade away eventually. I will leave that to your opinion.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.