HDFC Bank extends gains; Macquarie, Morgan bullish on Q4 updates, see 34% upside

HDFC Bank shares extended gains on April 5, following its fourth quarter (Q4FY24) business update that showcased strong deposit growth, boosting investor confidence.

This uptick in deposit performance has garnered positive attention from various international brokerages who are bullish on the private lender and see up to 34 percent upside in the stock from the last closing price.

Overnight, HDFC Bank’s US-listed shares rallied over 7 percent. The bank’s American Depository Receipt (ADR) on the New York Stock Exchange (NYSE) climbed to nearly $70.

Even as benchmark Nifty, Sensex traded in the red, HDFC Bank shares at 9:31 am were trading 0.8 percent higher at Rs 1,540.65 on the National Stock Exchange (NSE).

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Analysts at Macquarie believe that at the current valuation, HDFC Bank stock is attractive and investors should buy for a target of Rs 2,000. The brokerage has assigned an ‘outperform’ rating to the stock as it said that the robust Q4 update indicates that its consolidation strategy is playing out well.

The deposit growth has pleasantly surprised, while the decline in corporate loan growth and Loan Deposit Ratio (LDR) are viewed as excellent outcomes by the brokerage. HDFC Bank valuations remain attractive, suggesting that it may be an opportune time to add the stock, Macquarie said.

HSBC also has a ‘buy’ call on the stock with a target price of Rs 1,750 per share. In Q4FY24, the bank’s deposit performance exceeded street estimates of Rs 12-13 lakh crore, the brokerage noted.

Although there was a slowdown in loan growth and a reduction in LDR by 600 basis points, these were in line with expectations, according to analysts. “Despite this, the current valuation of 13x FY26 EPS remains very attractive,” HSBC said.

In its assessment of HDFC Bank, Morgan Stanley noted that the lender’s Q4 update revealed encouraging trends in deposit growth. But particularly noteworthy was the robust growth in retail deposits.

Despite gross loan growth moderating, there is optimism regarding potential improvements in the Liquidity Coverage Ratio (LCR) in the upcoming quarters, the brokerage said as it maintained an ‘overweight’ rating on the stock with a target price of Rs 1,900 per share.

Also Read | HDFC Bank’s robust Q4 business update supports banking rally; retail loan doubles YoY

Nomura has a ‘neutral’ rating on the HDFC Bank stock with a target price of Rs 1,625 per share as the brokerage noted a significant softness in loan growth figures. “Gross loan growth, when considered on a pro-forma basis, fell below expectations, lagging behind the overall banking system’s loan growth rate of 16% year-on-year,” it said.

HDFC Bank shares ended 3 percent higher on April 4 at Rs 1,482.30 on the National Stock Exchange (NSE). So far this year, the stock has fallen over 10 percent, underperforming benchmark Nifty 50 which has risen 3 percent during this period.

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