Should you buy, sell or hold HDFC Bank shares post Q4; here’s what analysts say

Shares of HDFC Bank were under stress on Monday, falling over 1% intraday even after the country’s largest private sector lender, in terms of market capitalisation, reported decent earnings in the final quarter of FY24. The bank reported a steady quarter, broadly in line with Street expectations driven by seasonality with higher deposits growth, but credit growth was slower than estimated.

Post Q4 results, most brokerages have given ‘Buy’ call on HDFC Bank with a target price of up to ₹2,010, an upside potential of 31% from the current market price. The brokerages view that current valuations are attractive as the banking heavyweight has fallen 11% year-to-date (YTD). The stock has underperformed Nifty Private Bank in the calendar year 2024, which witnessed a correction of 3.65% YTD as compared to 2.5% growth in benchmark index, Nifty50.

Reacting to Q4 numbers, shares of HDFC Bank declined as much as 1.2% to hit an intraday low of ₹1,512 on the BSE, while the market capitalisation slipped to ₹11.48 lakh crore. Early today, the stock opened higher at ₹1,550.35 against the previous closing price of ₹1,531.30, and touched a high of ₹1,556.50. The counter, however, lost momentum and slipped 2.85% from the day’s high level during the trade so far.

The counter witnessed strong volume with more than 8 lakh shares changing hands over the counter compared to two-week average of 5.26 lakh stocks.

As per the exchange data, the stock hit its 52-week high of ₹1,757.80 on July 3, 2023, and a 52-week low of ₹1,363.45 on February 14, 2024. The stock witnessed sharp correction this year after it reported disappointing earnings in December quarter of FY24.

How HDFC Bank performed in Q4?

HDFC Bank reported decent earnings in the recently concluded March quarter of FY24, which showed that its standalone net profit rose marginally to ₹16,512 crore, compared to ₹16,373 crore in the preceding December quarter. The lender also declared a dividend of ₹19.50 per equity share. The year-on-year figures were not comparable as the lender merged with its parent Housing Development Finance Corporation (HDFC) in July last year.

HDFC Bank's net revenue climbed to ₹47,240 crore, which include transaction gains of ₹7,340 crore from the stake sale in subsidiary HDFC Credila Financial Services during the quarter.  The core net interest income, the difference between interest earned and paid, grew to ₹29,080 crore in Q4 FY24, while the other income increased to ₹18,170 crore. The core net interest margin (NIM) stood at 3.44% on total assets during the quarter under review.

On the asset quality front, the gross non-performing assets (GNPAs) improved to 1.24% from 1.26% in Q3 FY24, while net non-performing assets (NNPAs) rose to 0.33% from 0.31% in the previous quarter.

Analysts view on HDFC Bank post Q4

Post Q4 numbers, domestic brokerage Motilal Oswal reiterated its ‘BUY’ rating with a target price of ₹1,950, saying that gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will boost return ratios over the coming years. “The bank refrained from giving any specific growth guidance as it is focusing on improving its Credit-Deposit (CD) ratio and replacing HDFC borrowings, which are coming to maturity,” it says in a report.

“We estimate HDFCB to deliver a steady 18% CAGR in deposits and sustain a 13.5% CAGR in loans over FY24-26. We thus estimate HDFCB to deliver an FY26 RoA/RoE of 1.9%/15.5%,” the report highlights.

ICICI Securities has upgraded the stock to ‘BUY’ from ‘ADD, while keeping the target price untouched at ₹1,850 per share. “Due to the sharp correction in stock price (down 10% YTD), we upgrade the stock to BUY. The re-rating is likely to be gradual as despite strong deposits growth, credit growth is likely to remain bit slower versus system and borrowing substitution is also likely to be gradual.

Axis Securities has also maintained ‘BUY’ call with a reduced target price of ₹1,885 per share from ₹1,975 estimated earlier. “We believe current valuations are attractive, given expectations of improved NIMs and RoA,” it says in a report.

Another brokerage JM Financial has also maintained ‘BUY’ with a target price of ₹2,010, saying that core bank valuations remained attractive and recommend adding weight to the stock on any weakness. “HDFC Bank’s core performance is gradually on the mend with improving deposit growth even as NIMs remained steady. We believe HDFC Bank remains well placed to navigate the difficult deposits environment. 2HFY25 should see meaningful improvement in core performance and should drive valuation rerating for HDFC Bank,” it says in a report.

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