Jefferies has retained a ‘Buy’ rating for HDFC Bank with a target price of Rs 2,030. This revised target sees a 33% upside target. The share price of HDFC Bank gained 0.46% to 1,534 during the intra-day trade on Thursday. “Over the next three years, we expect HDFC Bank to deliver 16-17% Cagr in earnings growth aided by synergies from mergers (expansion of home loan network to HDFC Bank branches & cross-sell of financial products to HDFC customers) as well as ramp-up of branches to mobilise deposits,” Jefferies explained in the report.
HDFC Bank’s market capitalization stands at 11,57,524.86 crore on the NSE. The P/E ratio is 23.73, and the dividend yield is 1.24. The stock price of HDFC Bank has fallen 2.3% in the last one week, 2.1% in the last one month and 2.5% in the last six months, while it has surged 8.1% in the last one year. The stock hit its 52-week high of Rs 1,757.50 on July 3, 2023, while it hit a 52-week low of Rs 1,365 on September 30, 2022, on the NSE.
Jefferies further believed that the stronger than expected growth in deposits and fall in interest rates will benefit HDFC Bank. The Bank will also get benefitted from the stronger cross-sell success which will aid group earnings and valuations.
Jefferies, however, has cautioned that ” the risk is from spike in rates as HDFC Bank now has a higher share of non-retail funds and its cost of funding will be more linked to market rates, than in the past. Also a slower than expected ramp-up of priority sector loans through the commercial and Rural Banking Division would drag margins & return on assets as it would lead to higher cost of compliance towards priority sector loans.”