Results review: HDFC, LTI and DMart

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1665929353874{margin-right: 10px !important;margin-left: 10px !important;}”] HDFC Bank, L&T Infotech (LTI) and Avenue Supermarkets (Dmart)

While the markets closed with an action-packed day on Friday, 14^th October, the weekend saw a few companies declare their results on Saturday 15^th October. The market will react to these results as soon as the markets opens on Monday 17^th October. Let’s check whether these results were in line with expectations or did they spring some surprises. While LTI is the second of the tier-2 IT companies to declare results, HDFC Bank is the first Bank and Dmart is the first from the retail sector to declare Q2FY23 results.

Here are some of the key takeaways from the results

HDFC Bank – A strong quarter aided by recovery in economic activity

• HDFC Bank’s standalone profit after tax grew by 20.1% YoY to Rs 10,605.8 crore in the Q2FY23, up from Rs 8,834.3 crore in Q2FY22. Analysts were expecting 16% YoY growth, but the bank has beaten these expectations.
• Net interest income (NII), or the difference between interest earned and interest expended, grew by 19 % YoY to Rs 21,021.2 crore in Q2FY23 from Rs 17,684.4 crore in Q2FY22.
• HDFC Bank’s total advances as of September 30, 2022 were Rs 14.4 lakh crore, an increase of 23.4% YoY increase.
• Total deposits showed healthy growth and were at Rs 16.73 lakh crore as of September-end, a 19% YoY increase.
• The asset quality improved during Q2FY23 with gross non-performing assets (NPAs) at 1.23 % of gross advances as against 1.35% in Q2FY22.

Our view

Fundamental

While HDFC Bank has beaten estimates, we await the results of other banks to confirm a trend for superior performance of the banking sector. Individually, HDFC Bank once again has demonstrated its ability to deliver successive YoY growth on key metrics.

Technical

Stock was trading in corrective phase since Feb 2021 to June 2022 from Rs 1640 to Rs 1270, after that it has started its upward journey & got retraced on 0.618 Fibonacci level and presently it is trading near 200 ema levels and forming a Double Bottom pattern which will be confirmed once we get a closing above 1465. Hence, it will be a good buy above 1465 for a short-term target of 1550.

 

LTI – Another tier-2 company that performed much better than the top IT players

• As expected, the tier-2 IT companies are posting better results than the top 4 player and LTI proved this with a total net profit of Rs 679.8 crore for Q2FY23, which was over 23% YoY gain from Rs 551.70 Cr recorded in Q2FY22
• The consolidated revenue from operations grew by 28.39% to Rs 4,836.7 crore in Q2FY23 from ₹3,767 crore in Q2FY22
• The company reported profit before tax (PBT) of Rs 901.30 Cr in Q2FY23, a YoY growth of 21% when compared to Rs 742 Cr recorded in Q2FY22
• The company is in the process of amalgamating Mindtree with itself, which was approved by its shareholders and unsecured creditors on August 10

Management Speak

“We are happy to report 21.6% YoY revenue growth in constant currency. We remain excited about the proactive conversations we are having with our customers and see increased traction in the cloud and analytics space. The strength of our pipeline and our sustained net headcount addition will continue to fuel our growth,” said Sudhir Chaturvedi, President Sales & Executive Board Member.

Our View

Fundamental

In line with our expectations, LTI’s net profits grew by more than 20% YoY. Some of LTI’s peers like Persistent Systems, Mastek and Mphasis are also likely to deliver similar results and as group, these are likely to outperform the largest name in IT services over next few quarters.

Technical

Stock was trading in corrective phase since Nov 2021 to May 2022 from Rs 7560 to Rs 3760, after that it has started its upward journey & got retraced on 0.50 Fibonacci level and presently it is trading slightly below 200 ema. Breakout will be confirmed once the stock close above 5050 with good volumes. Hence it will be a good buy above 5050 for a short-term target of 5700.

 

Dmart – Store expansion and prudent fiscal management lead to healthy margins

• Dmart’s revenue from operations rose 36.58% to Rs 10,638.33 crore in Q2FY23 as against Rs 7,788.94 crore in Q2FY22
• Dmart’s net profit stood at Rs 730.48 crore in Q2FY23, a YoY increase of 33% against Rs 564.03 crore in Q2FY22
• Dmart also managed to improve its profit after tax (PAT) as it has reported a PAT of Rs 790.35 crore in Q2FY23 against Rs 753.34 crore in Q2FY22
• Dmart has reported total expenses at Rs 9,638.07 crore in Q2FY23, whereas it stood at Rs 11,997.25 crore in Q2FY22. In Q1FY23, its total expenses stood at Rs 8,934 crore. So, the company has managed to bring down its expenses on both quarterly and yearly basis.
• Dmart continued its strategy of targeting large towns/cities and commenced operations in 6 more cities (Anand, Belgaum, Bhilai, Jaipur, Raipur and Vijayawada) during Q2FY23 and taking the total store count to 302 stores across India.

Management Speak

“The FMCG and staples segment of the business has performed better than general merchandise and apparel segments. Discretionary items in the non-FMCG segment, while recovering, have still not come back to pre-pandemic levels. The inflationary stress is more acute at lower price points in discretionary non-FMCG categories.” said Chief Executive Officer and Managing Director Neville Noronha.

Our View

Fundamental

Dmart has crossed revenues to Rs 10,000 crore for the first time this quarter is its highest ever quarterly revenues. The company is a well-entrenched player in the retail space and has lots of potential as it opens more stores and penetrates deeper into smaller towns as well. It remains one of the top long-term ideas for investment in the retail sector.

Technical

Stock was trading in corrective phase since Oct 2021 to May 2022 from Rs 5900 to Rs 3200, after that it has started its upward journey from Rs 3200 and presently it is trading sideways and may take support at 3900 level in case of week market sentiments. Hence it will be a good buy at 3900 levels for a medium-term target of Rs 6000.[/vc_column_text][/vc_column][/vc_row]