Despite HDFC Bank Shares Slumping for Two Consecutive Days, Bullish Stance from Jefferies and Other Brokerages Sparks Debate: Is Now the Time to Buy the Dip?
HDFC Bank’s shares have experienced a notable decline of 1.5%, totaling over 6% in just two trading sessions, settling at Rs 766. This drop follows the announcement of a modest 5% year-on-year increase in standalone net profit for the April-June quarter of FY27, amounting to Rs 19,060 crore compared to Rs 18,155 crore in the previous year. Net interest income (NII) experienced a 7% year-on-year growth, reaching Rs 33,534 crore, though this growth was somewhat constrained by a reduction in net interest margins (NIMs), which fell by 12 basis points quarter-on-quarter. Analysts remain largely optimistic, underscoring the bank’s fundamentals and potential for rebound in share value.
Brokerage firm Jefferies has reaffirmed its ‘Buy’ rating on HDFC Bank with a target price of Rs 1,050, projecting a 35% upside. The assessment highlights that despite a slight shortfall in NII expectations, lower operational expenses and credit costs have positively influenced profitability. Loan growth of 16% year-on-year, primarily driven by corporate lending, has been identified as a strategic focus, although it has impacted NIMs negatively. Furthermore, Jefferies anticipates earnings growth at a 15% compound annual growth rate (CAGR) over FY26-29, predicting a return on equity (ROE) of 13% for FY27.
Nomura and Motilal Oswal also maintain ‘Buy’ ratings, with target prices of Rs 950 and Rs 1,050, respectively. Nomura adjusted its growth estimates upward for FY27, anticipating loan and deposit growth at 16% and 17%, respectively, while motilal Oswal expressed a cautious outlook on NIMs and adjusted earnings forecasts down by 2%. Both brokerages express confidence in HDFC Bank’s ability to capitalize on forthcoming market opportunities, with Nomura highlighting the execution of the FCNR(B) scheme as a critical area to monitor. JM Financial has also retained an ‘Add’ rating, suggesting a target price of Rs 900, attributing constraints on loan growth to liquidity ratios while maintaining a positive long-term margin outlook.
In summary, despite recent share price volatility, the overall sentiment among analysts regarding HDFC Bank remains bullish. The bank’s operational strengths, growth trajectory in lending, and improved asset quality are set to potentially overcome immediate challenges posed by declining NIMs. Investors should closely observe the bank’s operational execution and its responsiveness to evolving market conditions, which will be pivotal in driving future profitability and share performance.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)