Consistent performer! Brokerages raise target price for HDFC Bank post Q2 results

Most global brokerages maintained their rating on HDFC Bank after the September quarter results while some of them have raised their target price on the private sector lender.

The most aggressive target price of Rs 1,700 for HDFC Bank was put out by Morgan Stanley which translates into a rise of nearly 40 percent from Friday's closing price of Rs 1,229.

Country's second-largest private sector lender HDFC Bank reported a healthy 26.75 percent year-on-year (YoY) growth in profit for the quarter that ended September 2019 with stable asset quality.

Profit after tax for the quarter increased to Rs 6,345 crore against Rs 5,005.73 crore earned in the same period last year. The growth was driven by average asset growth of 15 percent and a core net interest margin for the quarter of 4.2 percent.

Net interest income during the quarter grew by 14.89 percent to Rs 13,515.04 crore YoY with loan growth at 19.5 percent as compared to the same period last year.

Morgan Stanley maintained its overweight rating on HDFC Bank post September quarter results with a target price of Rs 1,700.The earnings per share (EPS) of 5 percent was ahead of estimates, and strongest in the last 6 years. The asset quality remains strong. Valuations are attractive at long-term averages, and the key driver behind net interest margin (NIM) compression was the sharp increase in liquidity.

Morgan Stanley expects core PPoP to pick-up and hover around 19 percent in H2FY20, and 23 percent in FY21.

HSBC maintained its buy rating on HDFC Bank post September quarter results but raised its target to Rs 1,515 from Rs 1,486 earlier.

The bank has a diversified book, and the large scale helps the bank to sustain superior earnings growth, said the note. The asset quality remains stable with improvement across loan segments.

The global investment bank expects a 21 percent loan CAGR over FY20-22 with average RoA/RoE of 2.1%/18%.

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