HDFC Bank shares trading near 52-week low: Target price, technicals, valuation, financial metrics and more

Shares of private sector lender HDFC Bank Ltd are trading near their 52-week low. HDFC Bank shares are down over 16% since the lender announced its earnings on January 16. The stock ended at Rs 1678.95 on January 16 before the company declared its Q3 results. HDFC Bank stock closed at Rs 1403.20 on February 9 this year. The earnings hit investor sentiment with the stock falling to its 52 week low of Rs 1382.40 on January 24, 2024.

The bank has a price to book ratio of 3.7. HDFC Bank has a PEG ratio of 0.5. A stock having PEG less than 1 is considered undervalued and with PEG ratio above 1 is regarded as an overvalued one.

Here’s a look at key metrics, which reflect the financial health of the lender.

CASA ratio

The CASA ratio of the lender stood at 37.7% as of December 31,2023 lower than the 44% as on December 31, 2022.

Net interest margin

Net interest margins (NIMs) slipped to 7.7% in the last quarter against 8.1% in the December 2022 quarter.

Yield on assets

The bank’s yield on assets rose to 8.3% in Q3 against 7.7% in Q3 of the last fiscal.          

Capital adequacy ratio

The bank’s capital adequacy ratio (CAR) stood at 18.4% as on December 31,2023 against 19.4% on December 31, 2022.

Net Interest Income

Net Interest Income (NII) of HDFC Bank climbed 24% to Rs 28,470 crore in the third quarter against Rs 22,990 crore in Q3 of the last fiscal.

Total Deposits

Total deposits of HDFC Bank rose 27.7% to Rs 22,14,000 crore in the third quarter against Rs 17,33,200 crore in Q3 of the last fiscal.

Provision Coverage Ratio

The Provision Coverage Ratio (PCR) climbed to 75% in the last quarter against 73% in Q3 of the previous fiscal.

The stock was trading at Rs 1406 in early trade today. The banking stock is trading in the oversold territory as the relative strength index (RSI) of HDFC Bank stands at 27.8. The stock has fallen 14.26% in a month. Market cap of HDFC Bank stood at Rs 10.67 lakh crore amid a correction in the broader market today. 

Total 1.89 lakh shares of the firm changed hands amounting to a turnover of Rs 26.60 crore on BSE. HDFC Bank stock has a one-year beta of 0.6. This signals the stock has low volatility.  

The large cap stock is trading lower than the 5 day, 10 day, 100 day, 150 day and 200 day moving averages.  

Here is a look at what brokerages said on the prospects of the stock post Q3 earnings.

Antique Broking has revised its target marginally lower to Rs 2,000 while assigning a buy call to the lender's stock. 

"Overall performance was in line and we largely maintain our earnings estimate and marginally revise our target price to Rs 2,000 (2.5x FY26 BV and INR 202 for subsidiaries) vs Rs 2,050 earlier. Maintain BUY," said Antique.

"Post-merger, a relatively weaker liability construct is keeping NIMs lower as compared to the past, which is getting offset by high productivity, and lean cost of operations and low credit cost. Thus, RoAs are likely to be similar to pre-merger levels but with a different P&L flow. This could keep multiples lower than the historic averages as concerns can emerge with respect to (1) Growth, as a large balance sheet would have a higher correlation with the macroeconomic environment and (2) NIMs, as a relatively weaker liability mix may have a higher impact on liquidity conditions," the brokerage added.

HDFC Bank is the top banking pick of BNP Paribas amid deep correction post Q3 earnings. It has assigned a target of Rs 2,410 for the lender. 

"Our estimates of key fundamentals, including ROA and ROE, build in a considerable margin of safety by assuming an accelerated timeline for PSL asset build-up, muted CASA momentum and no expected savings in operating cost from merger synergies. Despite these conservative assumptions, we see ROA touching 1.9 per cent by end-FY25 and ROE nearing the pre-merger steady state of 17 per cent by 2HFY26," said BNP Paribas.

Global brokerage CLSA has a target price of Rs 2,025 on the banking stock. It has maintained buy call on the counter after Q3 earnings. The brokerage has interacted with over 20 clients after Q3 earnings. "While most domestic clients were unhappy, we felt that it was slightly different for foreign investors, many of whom believe that we are near the end of the EPS cuts cycle. Key concerns, though, were about deposits and NIM, or net interest margins.” 

Brokerage KR Choksey sees more upside in the stock after Q3 earnings.

"We value the Bank's standalone business at 2.2 times FY26E P/ABV to Rs 1,716 and the subsidiaries at Rs 233, taking the total value to Rs 1,950 (earlier Rs 2,060 per share), implying an upside of 26.8% from the current price. Accordingly, we maintain a "BUY" rating on the shares of HDFC Bank," it said. It fixed a target price of Rs 1,950 for the banking stock.    

On the other hand, Nuvama Institutional Equities has lowered its target price while revising its earnings estimates downward for the lender.

"We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items. The Bank has exhausted its LCR, will need to lower its LDR and is running slower than guidance on deposit growth. In all, we are lowering the target to Rs 1,730 from Rs 1,770," said the brokerage. Nuvama has downgraded the stock to ‘hold’ after Q3 earnings.  

Financial services firm Motilal Oswal is bullish and has assigned a  target of Rs 1950 to the banking stock. The bank expects the lender to report healthy return ratios in the coming years on the back of an improvement in NIMs.  

The brokerage said HDFC Bank’s margin stood largely flat, which was slightly below its expectations, even as the Bank deployed excess liquidity and significantly drew down the LCR ratio. 

"Loan growth was healthy driven by growth in retail and continued traction in Commercial and Rural Banking. Asset quality ratios improved while provision coverage ratio (PCR) also inched up to 75 per cent. The Bank has continued to maintain 0.6 per cent buffer of floating plus contingent provisions, which provides additional comfort. Management suggested that NIMs will improve gradually over the coming years, which along with an improvement in operating leverage will enable the Bank to deliver healthy return ratios," the brokerage added.  

The private sector lender reported a 34 per cent rise in its standalone net profit to Rs 16,373 crore for the third quarter ended December 2023 against Rs 12,259 crore in the corresponding quarter of the previous fiscal year. 

Total income rose to Rs 81,720 crore in the October-December quarter of FY24 against Rs 51,208 crore in the year-ago period. Net interest income (NII) for the quarter rose 23.9 per cent YoY to Rs 28,470 crore compared with Rs 22,990 crore in the same quarter last year.

Pre-provision operating profit rose 24.3 per cent to Rs 23,650 crore. Provisions for the quarter jumped to about Rs 4,220 crore from Rs 2,810 crore in the year-ago quarter.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.  

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