HDFC Bank’s share price surged on the back of 50.60% jump in its Q2 net profit. On a half-yearly basis, the net profit grew 41% to 27,928 crore. This was the first quarterly financial result of the bank post merger with HDFC, which came into effect on July 1. However, the second quarter financial numbers are not comparable with the same period of previous fiscal as the two entities followed different accounting norms.
Should you buy, sell or hold HDFC Bank shares?
Jefferies: Buy – Target Price: 2,030
“As we trim NIM & loan growth slightly, we cut earnings estimates by 3% for FY24-26. We see mid-teens earnings growth and 17% return on equity (ROE) from FY25, aided by healthy deposit growth. We feel valuations are reasonable at 2.2x 12-month adjusted price-to-book. As highlighted in this recent report, The Second Dimension, after having emerged as the 7th largest bank in the world HDFC Bank now looks attractive for global portfolios as well. We maintain BUY with a Target Price of Rs 2,030, based on 2.6x Sep-25 adjusted price-to-book.”
Batlivala & Karani Securities: Buy – Target Price: Rs 1,916
“We believe the market has yet to fully recognise the bank’s ability to attract low-cost deposits and manage credit risks effectively. It’s worth mentioning that the bank has been losing its market share in unsecured credit over the past few quarters, limiting its growth compared to industry standards. Despite this, the bank possesses a significant amount of contingent provisions, a solid deposit base, strong credit risk management practices, and ample core capital, leading to a RoAE of 15%. Considering these factors, we consider the stock to be undervalued relative to its fundamental worth and thus, We maintain our Buy rating on the stock with a reduced target price of Rs 1,916 (earlier Rs 2,000), valuing merged banking entity at 2.6x P/ABV FY25E and Rs 220 for the subsidiaries.”
InCred Equities: ADD – Target Price: Rs 2,000
“We continue to believe that HDFC Bank is better placed on granular branch expansion and faster customer acquisition compared to most peers, which will ensure superior retail asset growth with healthy asset quality. We expect HDFC Bank to be 2% RoA and 16% RoE story. HDFC Bank is our high-conviction ADD-rated stock with a target price of Rs 2,000. We have valued the standalone bank at 2.7x FY25F BV and the subsidiaries at Rs 200/share. Slow growth and weak margins are key downside risks to our investment thesis.”