HDFC Bank shares gained over 1% to Rs 1,617 on NSE on Monday after the private lender reported a 19.9% jump in its consolidated net profit for the quarter ended December 2022. Beating market estimates, it reported a net profit of Rs 12,698 crore. The bank’s December quarter net revenue grew by 18.3% to Rs 31,488 crore from Rs 26,627 crore last year. So far this year, HDFC Bank’s share price has fallen over 1%, but it has rallied more than 18% in the last six months, and analysts maintain a bullish stance on the stock. Several brokerages hold buy rating HDFC Bank shares with a target price of up to Rs 1,925 per share, implying a 20% upside.
“HDFC Bank has reported steady performance for Q3FY23. NII growth picked up while core fee income growth was also strong however opex growth was higher due to accelerated branch expansion & employees additions. The bank reported healthy return ratios of 2.2% RoA and 18.8% RoE. Asset quality metrics are stable. While we remain positive on the bank, the near-term issue of the merger would continue to remain a key overhang as we need to have clarity on the various dispensations needed for a smooth transition,” said Rahul Malani, Analyst Banking and NBFC at Sharekhan by BNP Paribas.
Emkay Global: Buy
The brokerage noted that HDFC Bank continues to clock strong growth in the retail/SME segment which it believes should support its margins amid rising cost pressure. The merger process is on the fast track, with shareholder approval now in place; the bank is hopeful of it being completed earlier than guided. “That said, clarity on the stake of HDFC Life and other subsidiaries as well as on the merger structure by the RBI remains elusive. Notwithstanding the merger-related regulatory overhang, we believe HDFCB offers the best play on India’s consumption story and is also a good defensive bet in current choppy waters,” Emkay said in a note, adding that it is retaining its long-term BUY on HDFC Bank stock with a revised target price of Rs 1,925 per share.
Nuvama Institutional Equities: Buy
According to analysts, slower deposit growth in the run-up to the HDFC Bank-HDFC Ltd merger is a negative, but management continues to guide for strong growth in Q4FY23. “We believe deposit accretion is a key variable to monitor; otherwise, the bank will have to slow growth or settle for lower NIM. Retain’ BUY’ as HDFC Bank is among the country’s best retail franchises,” they said. The revised target price of Rs 1,865 is based on 2.6x BV FY25E versus 2.9x FY24E earlier. “Strong retail franchise is a key strength, but watch out for deposit growth in the run-up to the merger,” they added.
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