HDFC Bank Shares: Should You Buy This Private Lender After 10% Correction?
Shares of HDFC Bank have recently witnessed a 10% correction, causing analysts and brokerage firms to reassess their outlook on the stock. Despite this dip, many firms remain positive on the private banking major, expecting strong upside potential as the bank moves towards normalized growth and profitability.
Recent Performance and Current Price Range
On Friday, HDFC Bank shares remained range-bound between Rs 1,680-1,690, with a market capitalization of Rs 12.85 lakh crore.
- The stock recently corrected by nearly 10% from its 52-week high of Rs 1,880 reached in December 2024.
- However, it has shown an increase of 35% from its 52-week low of Rs 1,398 a year ago, signaling resilience.
Financial Highlights for Q3 2024
HDFC Bank reported a marginal 2% rise in net profit for the December 2024 quarter, totaling Rs 16,736 crore.
- Net Interest Income (NII) increased by 8% YoY, reaching Rs 30,653 crore.
- Net Interest Margins (NIMs) remained flat at 3.4%.
- Gross NPAs rose to 1.42%, and Net NPAs increased to 0.46%, indicating some pressure on asset quality.
Growth Strategy and Loan Book Reorientation
HDFC Bank has reported softer loan growth, as it focuses on profitable growth rather than top-line expansion.
- The bank is shifting its loan book toward higher-yielding CRB/retail assets and aiming to reduce its CD ratio.
- By replacing high-cost borrowings with deposits, HDFC Bank aims to improve its NIM in the medium term, according to Motilal Oswal Financial Services.
Analysts’ Ratings and Target Prices
Several brokerage firms have a positive outlook on HDFC Bank, despite some near-term challenges.
- Motilal Oswal has a ‘Buy’ rating with a target price of Rs 2,050, citing strong asset quality and potential margin recovery.
- Nirmal Bang estimates 9.1% loan CAGR and 11% earnings CAGR from FY24-FY27E, maintaining a ‘Buy’ rating with a target of Rs 2,073.
- Nomura has downgraded its growth estimates but remains optimistic about the bank’s ability to re-accelerate loan growth in the future. It upgraded the rating to ‘Buy’, with a target of Rs 1,920.
Market Position and Growth Prospects
HDFC Bank continues to strengthen its position in the liability franchise, gaining market share in a challenging macro environment.
- The bank’s strong capital position and merger synergies offer long-term growth potential.
- Despite concerns about margin moderation from repo rate cuts, HDFC Bank is expected to buck the trend and maintain solid growth, according to IIFL Securities, which has a ‘Buy’ rating and a target price of Rs 1,900.
Despite the recent correction, HDFC Bank remains a strong contender in the private banking space with solid fundamentals. Analysts see strong upside potential, with some predicting a 23% upside from current levels. Investors who are willing to look past short-term fluctuations may find HDFC Bank an attractive buy due to its strong asset quality, growth prospects, and strategic focus on retail assets.