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Buy HDFC shares: Q3 results meet estimates, brokerages bullish; check upside, target price

In the past five days, HDFC share price has dipped over 1%. However, the stock has rallied over 4% in the past six months and over 3.5% in a year. CLSA forecasts an 18% earnings CAGR over FY22-24.

HDFC Bank
HDFC Bank shares were almost flat at Rs 1,545 apiece on the BSE in Monday's opening deals (File Photo PTI)

HDFC Bank shares were trading flat in early trade on Monday morning after the private lender reported an 18% on-year jump in net profit in the October-December quarter (Q3FY22) aided by higher credit growth and lower provisions. HDFC Bank’s profit after tax was Rs 10,342.2 crore, in line with the street estimates. HDFC Bank shares were almost flat at Rs 1,545 apiece on the BSE in Monday’s opening deals. In the past five days, HDFC share price has dipped over 1%. However, the stock has rallied over 4% in the past six months and over 3.5% in a year. CLSA forecasts an 18% earnings CAGR over FY22-24.

ICICI Securities: BUY
Target price: Rs 2,000

“HDFC Bank is a leading private sector bank with consistent growth and operational performance over various cycles. The bank has maintained superior return ratios compared to its peers resulting in premium valuations,” said ICICI Securities. HDFC Bank’s share price has grown around 2.5x in the past five years. The brokerage remains positive and retained BUY rating on the stock. The stock is valued at 3.7x FY24E ABV and Rs 50 for subsidiaries while target price has been kept unchanged at Rs 2,000 per share.

Motilal Oswal: BUY
Target Price Rs 2,000

HDFC Bank reported an in line quarter, with NII/PPOP growth of 13%/10.5% YoY. “(HDFC Bank) continues to deliver strong business growth v/s its peers, resulting in market share gains. This was led by a healthy pickup in the Retail segment, while growth in Commercial and Rural Banking remains robust. Earnings were in line, despite additional contingent provisions. Asset quality ratios have improved, while the restructured book too moderated to ~1.4% of loans,” said Motilal Oswal in its note. The brokerage estimates HDFC Bank to deliver around 20% PAT CAGR over FY22-24E, with a RoA/RoE of 2.1%/18.1% in FY24E. It maintains Buy rating on the stock with a target price of Rs 2,000 per share.

Jefferies: BUY
Target price: Rs 2,160

Jefferies maintained its Buy rating on HDFC Bank after December quarter results. It raised the target price on HDFC Bank stock to Rs 2,160, an upside of nearly 40 per cent from the current market price. The revenue momentum is steadily building up and is on track for a comeback. The net interest income (NII) growth is likely to improve to 16-17% over H1FY23. Jefferies was a tad disappointed with weak fees but was positively surprised by better asset quality/lower credit cost. It sees an 18% CAGR in profit over FY21-24.

Emkay Global: BUY
Target price: Rs 2,050

HDFC Bank stock has underperformed by its own standards, as well as, in comparison with its peers, after the management change and RBI’s embargo on its card/digital initiatives and the Covid-induced disruption, according to Emjay Global. “The card embargo is now lifted, while hopes remain abound on lifting of the restrictions on digital initiatives 2.0 in the near future. With growth trends improving and asset-quality well under control with strong buffers in place to absorb any dislocation due to a fresh Covid wave, we expect the bank to report healthy return ratios (RoE @ 17-18%),” the brokerage firm said. It retained ‘Buy’ rating on the stock with a target price of Rs 2,050.

Nirmal Bang: BUY
Target Price: Rs 2,006

HDFC Bank reported a stable quarter with net profit reported as expected by Nirmal Bang. The brokerage has cut their earnings estimates due to lower yields and retail fee income as it bakes in the latest quarter’s performance on these two metrics. “With discussion about covid’s impact on asset quality taking a back seat, we think that retail growth, along with NIM expansion, will be the key deliverable to watch out for in the near to medium term. We maintain BUY on the stock with a target price (TP) of Rs 2,006,” it said.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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