HDFC Bank a beacon of safety amid rising systemic stress, shares deserve premium, says Emkay Global; raises target price
- HDFC Bank's shares have delivered a modest return of 5.7% YTD, trailing the benchmark indices. In comparison, the Sensex has gained 8.6%, while the Nifty Bank index has posted a 6% increase during the same period.
HDFC Bank share price gained nearly 2% on Monday amid broad-based buying in banking stocks, fuelling a short-covering rally in the Indian stock market. HDFC Bank stock rose as much as 1.91% to a high of ₹1,805.90 apiece on the BSE.
Positive momentum in HDFC Bank shares was also boosted after Emkay Global reiterated its bullish view on the banking heavyweight and raised target price on the stock.
HDFC Bank’s management reiterated its unwavering focus on customer satisfaction, arresting employee attrition, upgrading tech, and reducing regulatory friction. It plans to cut its LDR to pre-merger level (~85%) from the current 100% by cannibalizing credit growth and accelerating deposit growth, noted Anand Dama, Senior Research Analyst at Emkay Global Financial Services.
Dama expects HDFC Bank to grow at sub-system levels in FY25, mimic system in FY26, and outperform in FY27. Moreover, HDFC Bank proactively reduced unsecured loan growth earlier on, but would be open to quality loans as others take a back seat.
HDFC Bank expects sub-system credit growth in FY25, mimic system growth in FY26, and outperform the system in FY27 as the regulatory drag is now behind.
“Falling LDR/ higher CoF could put some pressure in the near term, but margins are expected to inch-up in the long run, led by better portfolio mix/lower share of borrowings (8-9% of liabilities). HDB Finance’s listing should help meet current RBI guidelines, while the bank awaits clarity on Holdco norms for further stake cut. HDFC Bank’s asset quality may witness intermittent volatility, but would outperform peers. With rising systemic stress, we believe HDFC Bank deserves a safety premium given healthy RoAs and provision/capital buffer,” said Dama.
Emkay Global retained its ‘Buy’ rating on HDFC Bank shares and increased the target price by 5% to ₹2,100 apiece, implying an upside of 18.5% from Friday’s closing price.
HDFC Bank stock price update
HDFC Bank's share price has exhibited subdued performance over the past year. However, the stock of India's largest private sector bank has shown some recovery, appreciating over 3% in the last month and 8% in the past six months.
Year-to-date (YTD), HDFC Bank's shares have delivered a modest return of 5.7%, trailing the benchmark indices. In comparison, the Sensex has gained 8.6%, while the Nifty Bank index has posted a 6% increase during the same period.
At 12:25 PM, HDFC Bank shares were trading 1.43% higher at ₹1,797.40 apiece on the BSE, commanding a market capitalization of around ₹13.74 lakh crore.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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