HDFC Bank gains as Goldman Sachs reinstates ‘buy’ call, sees 21% upside

Shares of HDFC Bank jumped nearly 1.5 percent in the early trade on June 21, as Goldman Sachs reinstated its “buy” rating on the stock and raised its target price from Rs 1,840 to Rs 2,050 a share, a 21 percent upside from the current market price.

India’s largest private sector bank is expected to emerge stronger after the merger with HDFC Limited, Goldman Sachs said in its report on June 21. It forecasts sector-leading earnings growth of 18 percent during FY23-26. This will be on the back of superior return ratios with a huge degree of earnings visibility in FY23-26.

“The stock currently trades at 14.6x standalone FY24 earnings per share (EPS) estimate and is expected to continue with strong balance-sheet growth and superior profitability,” the report said

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Not just Goldman Sachs, several brokerages, too, see high growth for the private sector lender.

Motilal Oswal

The brokerage house said in a recent report that the HDFC Bank is well-positioned to lead new-age banking. The brokerage house has given a potential upside of 21 percent with a target price of Rs 1,950.

“The bank is well positioned to lead new-age banking. At its analyst day meet, HDFCB management highlighted how the bank is getting future-ready by focusing on strengthening its digital capabilities and sustainable growth after the merger while maintaining RoA at the current level,” the report said.

The bank plans to announce various initiatives to provide a superior experience to customers, it said.

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“Growth is likely to be broad-based, mainly driven by technology and expanding distribution network, while improved cross-selling will further augment revenue growth,” the report said.

The bank said that the cost-to-income (C/I) ratio may remain sticky for the near term but could decline to 30 percent over the next 10 years.

“HDFCB remains one of our preferred picks and we maintain our “buy” rating with a TP (target price) of INR 1,950,” it said.

Prabhudas Lilladher

Brokerage firm Prabhudas Lilladher also has retained its “buy” rating on the stock in a recent report, with target price of Rs 1925, a potential upside of more than 20 percent. The focus of the bank is now shifting from product to customer, it said

HDFC Bank has given a return of 0.50 percent over the last six months against benchmark Nifty Bank gaining 3.02 percent during the period.

At 10.05 am, the stock was trading 0.94 percent higher at Rs 1,622.55 on the National Stock Exchange.

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