Analysts Positive On HDFC Bank Stock But Cut Earnings Estimates Post Q3 Results

Brokerages have cut their earnings estimate for HDFC Bank, accounting for slower loan growth, but remain positive on the lender after it delivered a strong December-quarter performance in a tough macroeconomic environment.

Given the bank’s focus on reducing credit-to-deposit ratio at an accelerated rate, Motilal Oswal Financial Services has factored in a moderation in loan growth to 5% and 10% for the current financial year and next year, respectively.

"...the gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will support return ratios over the coming years," the brokerage said in an earnings note.

It has also cut the bank's earnings estimate by 3% each for the next two financial years, reflecting slower loan growth and moderation in current and savings accounts.

Motilal Oswal has maintained its 'buy' rating on the stock with a target price of Rs 2,050. The lender's stock is currently trading at Rs 1,671 per share.

Nirmal Bang Institutional Equities has cut its target price on the stock to Rs 2,073 from Rs 2,190 earlier but has maintained its 'buy' rating as it remains positive on HDFC Bank for the long term due to its best-in-class asset quality, growth potential because of a good capital position and merger synergies in the long term.

Further, a non-specific provision buffer at 1.4% of loan book also provides comfort, Nirmal Bang said.

Systematix Institutional Research has cut the bank's current financial year credit growth estimate to 3.5% on year from 7% earlier. The brokerage has raised its target price to Rs 2,030 from 1,945 earlier and has retained its 'buy' rating.

Nuvama Institutional Equities has also retained its 'buy' rating with a target price of Rs 1,950 led by back-to-back positive outcomes on asset quality in a tough macro environment, a substantial gain in deposit market share, consistent improvement in CD ratio and core margins in-line with expectations.

Emkay Global Financial Services has slightly trimmed its earnings estimates by 1-3% for 2024-25 (Apr-Mar) to 2026-27 and expects the bank to deliver a healthy 1.8-1.9% return on assets. The brokerage has retained its 'buy' rating on the stock with a target price of Rs 2,100.

Dolat Capital Research also tweaked its earnings forecast for the bank, factoring in lower growth and slightly improved operational expenses.

The brokerage has retained its 'accumulate' rating on the stock with a price aim of Rs 1,950 as it believes that there is a positive bias on valuations from steady asset quality metrics, but it will look for improvement in business growth as a key trigger.