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HDFC Bank share price falls 3% post Q4 earnings; analysts cut target prices but retain ‘BUY’ rating

HDFC Bank’s share price has fallen more than 7% so far this year.

HDFC Bank's share price has fallen more than 7% so far this year. (Image: REUTERS)

HDFC Bank’s share price tumbled 3.7% on Monday morning as investors reacted to the company’s January-March quarter earnings that were released on Saturday. The stock hit an intraday low of Rs 1,409 per share on the BSE. HDFC Bank, the second-largest lender in the country, reported a 23% year-on-year jump in net profits but the net-interest income was lower than anticipated. Although analysts remain bullish on the bank stock, many have cut target price estimates. HDFC Bank’s share price has fallen more than 7% so far this year.

What analysts say –

Motilal Oswal: BUY

Analysts at Motilal Oswal noted that HDFC Bank has continued to demonstrate strong business growth when compared to its peers, resulting in market share gains. “NII and PPoP growth stood modest due to a decline in margins even as earnings were buoyant because of benign credit cost despite making additional contingent provisions,” the brokerage firm said in a report. Analysts at Motilal Oswal expect HDFC Bank to deliver close to 20% PAT CAGR over FY22-24, with an RoA/RoE of 2.1%/17.8% in FY24. The brokerage firm has maintained its ‘Buy’ rating on the scrip but has revised the target price lower to Rs 1,850 per share. Prior to the results, Motilal Oswal had a Rs 2,000 target pinned on HDFC Bank shares.

Kotak Securities: BUY

HDFC Bank’s earnings are not seen as a challenge by Kotak Securities but they do see multiples to be well-positioned. The brokerage firm has also raised questions on the proposed merger with HDFC. These include the final shape of the merger, the eventual cost of the transition given various regulatory compliances, the path to compliance which may include building buffers like deposits or costs well ahead of timelines, the ability to sustain industry-leading growth rates, and RoE/RoA post the merger. Kotak Securities has trimmed multiples marginally to reflect the recent business performance. The fair value has been cut to Rs 1,650 per share from Rs 1,780 apiece.

Edelweiss: BUY

“We believe two consecutive let-downs on core PPOP coupled with merger uncertainty could weigh on the stock,” analysts at Edelweiss wrote in a post-result note. The brokerage firm highlighted that HDFC Bank’s slippage ratio improved to 1.4% on-quarter basis from 1.6%, but lower recoveries edged up GNPLs. The target price has been cut to Rs 1,860 per share from Rs 2,000 earlier.

Nirmal Bang: BUY

Analysts at Nirmal Bang have the have cut their earnings estimates by 4-5% over FY23- 24E on account of lower NIMs, lower treasury gains, and higher opex (as retail growth picks up). “We have also reduced our valuation multiple on the stock to account for the systemic increase in interest rates,” they added. The brokerage firm maintains a positive outlook on the stock with a target price of Rs 2,042 per share.

Yes Securities: ADD

The brokerage firm said that while HDFC Bank’s management stated that it has deliberately chosen lower NIM to keep opex and credit cost under control, a 2.3% NII growth sequentially is disappointing. Analysts at Yes Securities margin contraction has dampened the positivity of asset growth for HDFC Bank. They retain their Add rating on the stock with a revised target price of Rs 1,668 apiece, down from 1,900 per share.

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