HDFC Bank has been among the favourite stocks of investors for a long time.
Even in a volatile market, the stock has given a return of about 21 percent in the last one year while the equity benchmark Sensex has gained just 3 percent in that period.
The bank reported healthy growth in its fourth-quarter results for FY23.
As Mint reported, the bank posted a profit before tax of ₹15,935.5 crore. But after providing ₹3,888.1 crore for taxation, the Bank earned a net profit of ₹12,047.5 crore, an increase of 19.8 percent over the quarter that ended March 31, 2022.
Its revenue stood at ₹32,083.0 crore for the fourth quarter, rising by 21 percent YoY.
Net interest income (NII) climbed by 23.7 percent to ₹23,351.8 crore in Q4FY23 from ₹18,872.7 crore in Q4FY22. Core net interest margin was at 4.1 percent on total assets, and 4.3 percent based on interest-earning assets.
The stock hit its 52-week high of ₹1,715.85 on BSE on April 17.
MintGenie collated views of brokerage firms and technical analysts to understand whether the stock is a ‘buy’ at this juncture or not. Take a look:
Fundamental views
Brokerage firm: Motilal Oswal Financial Services
The brokerage firm has a ‘buy’ call on the stock with a target price of ₹1,950.
The brokerage firm underscored that the bank reported an in-line quarter with healthy growth in NII (net interest income), even as margins remained stable, while core PPoP (pre-provision operating profit) growth remained modest.
"Loan growth was driven by sustained momentum in the retail segment and robust growth in commercial and rural banking. Asset quality ratios remained robust, while the restructured book moderated to 31bp of loans. Healthy PCR and a contingent provisioning buffer should support asset quality," Motilal Oswal pointed out.
"We uphold our earnings projection and estimate an about 19 percent PAT CAGR over FY23-25, with RoA (return on assets) and RoE (return on equity) at 2 percent and 17.7 percent, respectively, in FY25. A potential pick up in margins and progress on the merger would be the key monitorable," said Motilal Oswal.
Brokerage firm: Emkay Global Financial Services
The brokerage firm has a ‘buy’ call on the stock with a target price of ₹2,050.
Emkay has cut its FY24E earnings estimates by one percent, factoring in the elevated costs, but expects the standalone bank to deliver a superior RoA and RoE of 2 percent and 17-18 percent, respectively, over FY24-26E.
As per the brokerage firm, HDFC Bank expects the merger to be completed by July 2023, once RBI approval is in place which will be critical from the point of view of the merger’s structure, including clarity on HDFC Life stake/merger of NBFC subsidiaries and regulatory dispensations, if any.
"Notwithstanding the merger-related regulatory overhang, we believe HDFC Bank offers the best play on India’s consumption story and is also a good defensive bet in current choppy waters. We retain a long-term buy, with a revised target price of ₹2,050 versus ₹1,925 (valuing the core bank at three times Mar-25E ABV) and a subs valuation of ₹87 per share," said Emkay.
Technical views
Expert: Aamar Deo Singh, Head Advisory, Angel One
HDFC Bank continues to trade positively, post its quarterly results, however, the stock runs into a stiff zone of resistance around ₹1,720-1,730 whereas crucial support is seen around the ₹1,530-1,550 zone.
"For long-term investors, holding the stock would ideally be a good idea, however, for those looking at the stock from a short-term perspective, booking profits at the current levels is advisable," said Singh.
"Until the stock close and sustain consistently above the ₹1,730 mark, selling pressure would continue. The stock, being a heavy-weight in the index, has definitely lent its weight to both the indices, Nifty and Bank Nifty, but interesting times are definitely ahead for the stock," Singh added.
Expert: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has picked up well from the level of ₹1,540 where it had bottomed out and once again has witnessed a tough resistance near ₹1,700.
A decisive breach above ₹1,700 is very much necessary to indicate a breakout and for a fresh upward journey.
“With the RSI indicator well-placed, one can currently hold the stock and only a breach below ₹1,620 would weaken the bias. Fresh buyers if buying at the current rate can keep a stop loss of ₹1,620,” said Parekh.
Expert: Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers
For the last nearly 1.5 years, this counter has tested ₹ ₹1,720- 1,725 levels thrice, making it a historical resistance zone.
Additionally, on April 17, 2023, it made a massive bearish engulfing candlesticks pattern (the high of that candle was 1,720) while the daily scale RSI made an impulsive structure near the overbought zone of 70 levels which is a matter of concern.
“One should immediately book some partial profits in the range of ₹1,670-1,690 levels (if again tested) and wait for some correction and then re-enter around ₹1,600 levels. If ₹1,725 is taken out by the next week sustainably, then the doors will be open for an all-time high,” said Patel.
Disclaimer: The views and recommendations given in this article are those of individual experts and broking firms. These do not represent the views of MintGenie.
