HDFC Bank shares at Rs 2,200? Analysts see more upside after 19% jump in 6 months

HDFC Bank, whose shares have jumped 19 per cent in the last six months, reported an line December quarter results.  While analysts are a bit cautious over the HDFC merger transition, they felt the stock is trading at reasonable valuations and is a defensive bet amid the prevailing choppy markets. They suggested price targets as high as Rs 2,200 for HDFC Bank, suggesting up to 37 per cent upside potential on the counter.

A slower deposit growth in the run-up to the merger is a negative, but the management continues to guide for strong growth in March quarter, said Nuvama Institutional Equities.  It said deposit accretion is a key variable to monitor; otherwise, the bank will have to slow growth or settle for lower net interest margin (NIM).

While calling HDFC Bank among the country’s best retail franchises, Nuvama gave a target of Rs 1,865 on the counter.

Motilal Oswal Securities said HDFC Bank's Q3 profit after tax (PAT) was up 19 per cent YoY, supported by a pickup in net interest income (NII) growth and controlled provisions. NIM stood stable sequentially. Pre-provision operating profit (PPoP) growth remained modest at 13 per cent YoY, but core PPoP grew a healthy 19 per cent YoY, the brokerage said while suggesting a target of Rs 1,930 on the stock.

The headline earnings were in-line, but quality was a tad weaker than what Antique Stock Broking was expecting. "Nevertheless, underlying core PPP is on an improving trend, near NIL stress loans, levers of changing asset mix, gains from expanded distribution, and our view that even under a merged umbrella the bank's ability to grow in lending by 18 per cent YoY (market share gains) with RoA of 1.8 per cent stays and drives our positive view," the brokerage said while suggesting a target of Rs 1,900 on the counter.

Emkay Global said HDFC Bank remains one of the few banks to clock a strong deposit growth amid rising competition for deposits, given its robust franchisee.

On the credit front, HDFC Bank remains opportunistic on the corporate side; thus and Emkay said it is not too worried about the Q3 growth moderation. But the clarity on the stake in HDFC Life and other subsidiaries as well as on the merger structure by the RBI remains elusive, it said.

"Notwithstanding the merger-related regulatory overhang, we believe HDFC Bank offers the best play on India's consumption story and is also a good defensive bet in current choppy waters. The stock is trading at reasonable valuations, at 2.6 times FY24E ABV. We retain our long-term BUY, with a revised target price of Rs 1,925 per share and a subsidiary valuation of Rs 78 per share," it said. ​

Bernstein has an 'outperform' on the stock with a target of Rs 2,200. BofA Securities has a target of Rs 2,000 on the stock while Kotak Institutional Equities has a fair value of Rs 1,800 for the stock.  Nirmal Bang sees the stock at Rs 1,854 and ICICI Securities has a target of Rs 1,874 on the stock.

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