The lender’s financial performance has been strong, but high valuations may limit future profits.
IDFC First Bank is one of numerous private banks that appear to have piqued the curiosity of investors, with its share price soaring 158% in a year. One important factor for these improvements is strong performance.
Net Interest Income (NII) increased 35% year on year (YoY) and 10% sequentially in Q4 FY23, demonstrating business strength and margin development. Interest income increased by 41% year on year (YoY) and 9% quarter on quarter (QoQ). Interest expenditures increased by 50% year on year and 8% quarter on quarter. The reported NIM (net interest margin) for Q4 FY23 increased by 28 basis points sequentially to 6.41 percent. To Rs 803 crore, net profit increased 134% year on year and 33% quarter on quarter. Deposits increased by an astounding 47 percent year over year.
A total of 38.75 lakh shares of the company were traded, resulting in a turnover of Rs 27.61 crore. On the BSE, the company’s market capitalization increased to Rs 47,326 crore.
In terms of technicals, the relative strength index (RSI) of IDFC First Bank stock is 80.8, indicating that it is very overbought. The one-year beta of IDFC First Bank stock is 1.4, suggesting extremely high volatility throughout the time. IDFC First Bank shares are trading above their five-day, twenty-day, fifty-day, hundred-day, and two-hundred-day moving averages.
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Since April 28 of this year, the banking stock has risen 16.69%. On April 29, 2023, profits were revealed after market hours.
The lender’s interest produced increased by 41.08% in the March 2023 quarter, to Rs 6424 crore, compared to Rs 4553.64 crore during the March 2022 quarter. Operating profit increased 88.58% in Q4 to Rs 1558.66 crore, compared to Rs 826.52 crore in the March 2022 quarter. Net profit increased 134% to Rs 802.62 crore in Q4 from Rs 342.73 crore in the previous fiscal’s equivalent period.
Net profit increased 1575% year on year to Rs 2437.13 crore for the fiscal year ended March 2023, from Rs 145.49 crore for the fiscal year ended March 2022. Interest generated increased by 32.35% to Rs 22727.54 crore in the fiscal year ended March 2023, compared to Rs 17172 crore in the fiscal year ended March 2022.
“IDFC First Bank is very overbought on the daily charts, with strong resistance at Rs 73.2,” stated Abhijeet of Tips2trades. Investors should take gains at current levels and wait for a drop around the daily support level of Rs 58 to open new buy positions for greater returns.”
“After presenting a strong set of numbers in Q4FY23, IDFC First Bank shares jumped 16% from Rs 61.50 to 70.80 and are now trading at their 52-week high level,” stated Dr. Ravi Singh, Vice President and Head of Research at Share India. Following strong quarterly earnings, the whole banking sector is on the rise. This surge in IDFC Frist Bank share price will likely continue in the short future, with the target price of Rs 85.”
On May 16, this year, HDFC Securities set a target of Rs 79.5.
“We project that bank advances will grow at a CAGR of 22% between FY23 and FY25E.” Increased profitability would bring RoA to 1.3% by FY25E. The bank is priced at 1.6x FY25E ABV for a base case aim of Rs 73 and 1.75x FY25E ABV for a bull case target of Rs 79.5 over the next 2-3 quarters. “Investors can buy the stock at Rs 66-68 and add on dips at Rs 59-60 (1.3x FY25E ABV),” according to the brokerage.
Motilal Oswal Securities remarked after the earnings that IDFC First Bank was entering a phase of robust loan growth as the drag from the wholesale book continued to diminish. This, it claims, will be assisted by a significant increase in profitability as a result of the replacement of high-cost borrowings, improved cost trends, and regulated credit costs. The brokerage set a target price of Rs 75 on the shares.
