HDFC to report Q4 nos today; here's what leading brokerages expect

HDFC Ltd is slated to report its March quarter earnings on Monday, May 25. Analysts see the net profit declining anywhere between 30 per cent and 70 per cent year-on-year (YoY) coupled with elevated asset quality concerns during the period under review. They, however, expect the housing financier to set aside lesser funds as provisions, taking comfort from higher provisioning created in the December quarter of the current fiscal (Q3FY20).

The NBFC will also consider raising funds via non-convertible debentures (NCDs) or any other hybrid instrument during the same board meeting.

In the year ago quarter, HDFC had reported a standalone net profit of Rs 2,861.58 crore while the same stood at Rs 8,372.49 crore in Q3FY20. Besides, the net interest income (NII) stood at Rs 3,161 crore for the quarter ended March 31, 2019. The same was at Rs 3,239.9 crore in Q3FY20.

During the December quarter of FY20, the gross non-performing loans were Rs 5,950 crore, while it was Rs 4,777 crore in Q4FY19. The provisions, meanwhile, were Rs 2,995 crore in the previous quarter of FY20.

It must be noted that HDFC’s net profit cannot be compared on a sequential basis as Q3FY20’s profit included one-time gain of Rs 9,019.81 crore from merger of Gruh Finance with Bandhan Bank.

At the bourses, the stock has corrected 32.44 per cent during the quarter under review, as against a 28.56 per cent slide in the benchmark S&P BSE Sensex, ACE Equity data show.

Here’s what leading brokerages expect from the results:

Nomura

The brokerage expects stable trend in growth with individual asset under management (AUM) growth of 15 per cent YoY. It pegs the disbursed loans at Rs 5.20 trillion in Q4FY20, up 3 per cent sequentially, from Rs 5.05 trillion in Q3FY20. This would translate into a 13 per cent YoY jump from Rs 4.62 trillion. As regards net profit, it projects the PAT to plunge 77 per cent sequentially and 32.5 per cent YoY at Rs 1,931.8 crore.

Edelweiss Securities

"Growth momentum will be below trend with softer individual and corporate growth. The profitability will also be impacted by no dividend income and MTM on RBL bank," said analysts at the brokerage in a result preview note.

They estimate the net profit to contract 70 per cent YoY to Rs 872.6 crore for the recently concluded quarter, while pre-provision operating profit is seen at Rs 166.1 crore.

ICICI Securities

The brokerage sees NII at Rs 2,907.4 crore, logging a growth of 2.1 per cent YoY but slipping 2.6 per cent QoQ, factoring stable spread but lower growth.

“Risk of asset quality is expected to rise, both, on individual and corporate loans. Lease Rental Discounting (LRD) loans may be impacted with lockdown in malls, etc. We expect flat net interest margin (NIM) at 2.2-2.3 per cent,” they noted in their result expectations report.

They see provisions at Rs 700 crore, as huge provisions were made in Q3 using sale proceeds.

“Revaluation of investment in RBL Bank (cost of acquisition Rs 60 crore) may impact P&L account to the tune of Rs 184 crore. No dividend or sale from investment was received in Q4FY20,” they wrote.

Motilal Oswal Financial Services

The brokerage sees core operating profit at Rs 3,329.2 crore, up 9 per cent YoY, from Rs 3,057.3 crore clocked in Q4FY19. The core profit before tax (PBT), meanwhile, is seen growing 7 per cent YoY to Rs 3,006.2 crore during the quarter under review.

However, adjusted for income from sale of investments, the brokerage pegs net PBT at Rs 2,861.7 crore.

“We expect 14 per cent YoY AUM growth, while margins could largely be stable. With no dividend income, sell-downs during the quarter worth Rs 5,500 crore may impact earnings,” they wrote in the earnings expectations note.

Nirmal Bang Institutional Equities

The analysts at the brokerage see credit costs for the quarter under review at 0.8 per cent, while NIM is seen at 3 per cent. They expect 13 per cent YoY growth in loans and advances, but see them slipping 5 per cent QoQ, to Rs 4.53 trillion. Deposits, meanwhile, are pegged at Rs 4.13 trillion.