Shares of HDFC Bank opened Monday’s trade muted despite being in green after the lower-than-expected Q4 profit on account of increased provisioning.
In the January-March quarter, the Bank recorded a standalone net profit of Rs 16,500 crore, compared to Rs 16,400 crore in the previous quarter. However, the stock later experienced a decline of over 1% from the day’s high, trading down by 0.89% at Rs 1,517.60 on the NSE.
Following the Q4 earnings, nearly all foreign brokerages have expressed confidence in the stock. Both Jefferies and other top brokerages have maintained a ‘buy’ recommendation on the counter, accompanied by a raised target price.
Here what’s brokerages and analyst say on HDFC Bank
Jefferies on HDFC Bank
Jefferies noted that Q4 profit at the lender of Rs16,500 crore came in below estimates, but Pre-provision operating profit (PPOP)had been inline & adj. for one-offs. EPS was at Rs 21 & ROA was at 1.9%. A key positive as suggested by the brokerage has been a slight rise in NIMs. Deposit growth was strong at 17% (merger adj.), but loan growth lagged at 12%, it added.
Axis Securities on HDFC Bank
Axis Securities has maintained a BUY recommendation on HDFC Bank, citing improved deposit growth as the bank exited FY24. However, credit growth was slower due to a focus shift towards deposit accretion.
Continued momentum on deposit mobilization and the trajectory of Net Interest Margins and Return on Assets are seen as key factors for potential re-rating of the stock. With a valuation of 2.5x Sep’25E ABV (Adjusted Book Value), Axis Securities has set a target price of Rs 1,885/share, down from the earlier target of Rs 1,975/share, which was based on a valuation of 2.75x Sep’25E ABV.
Elara Securities on HDFC Bank
Elara Securities has upgraded its recommendation on HDFC Bank from Accumulate to Buy, despite acknowledging the challenges the bank has faced, including the impact of Covid-19, management transitions, RBI restrictions, and merger issues.
While merger challenges are nearing resolution, the bank lacks immediate positive triggers. Despite a recent correction of over 6% post Elara Securities’ downgrade in September 2023, the risk-reward ratio appears favorable, prompting the upgrade. The target price remains unchanged at INR 1,889.
InCred Equities on HDFC Bank
InCred Equities has expressed confidence in HDFC Bank’s positioning, citing its enhanced penetration leading to portfolio granularity and effective loan pricing strategies. The bank is anticipated to deliver approximately 2% Return on Assets (RoA) and 16% Return on Equity (RoE).
InCred Equities has reiterated its high-conviction ADD rating on HDFC Bank, setting a target price of Rs 2,000. Valuing the standalone bank at approximately 2.5x FY26F Book Value and its subsidiaries at Rs 200 per share, the firm acknowledges slow growth and weak margins as key downside risks to their thesis.
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