Top Bank's Giant Awakening! HDFC Merger Unlikely To Hit HDFC Bank's Earnings Ahead, Stock's TP At Rs 2300

India's largest bank in terms of market share, HDFC Bank witnessed a healthy buying trend in the trading week that ended on December 8th. The stock's weekly upside was over 4%, better than the Nifty 50 it new lifetime high of over 21,000 mark. The reason behind investors turned optimistic on HDFC Bank is because brokerages believe the lender is on a steady growth and return ratios path. They also believe that HDFC merger shocks are unlikely to change loan growth expectations, and confident in deposit gains for HDFC Bank.

Brokerages like Antique Stock Broking have recommended buying HDFC Bank for a target price of Rs 1,975. But technical research analyst Prabhudas Lilladher has set an even higher target price on HDFC Bank at a staggering Rs 2100-2300 level.

From the current price level, HDFC Bank's shares have the potential for up to a massive 39% upside going forward. On December 8th, HDFC Bank shares ended at Rs 1653.10 apiece, up by 1.38% on BSE with a market cap of over Rs 12.54 lakh crore. HDFC Bank is not only the largest private sector bank, but also the largest bank in the country in terms of market share.

On Friday, Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher said, " After a long time and almost more than 2 years of consolidation, HDFC Bank formed a CUP and handle pattern on the weekly chart and has given a breakout above 1580 zone(weekly close). Further ahead, the next major resistance zone is at around 1730 levels, which has been acting as a strong hurdle for the last 2 years."

The analyst added, "The stock has moved past the 50 EMA at around 1605 and strong support maintained near the important 200 period MA is at 1430. A decisive weekly close above the 1730 zone shall awaken a giant towards the next higher target of the 2100 level. With the RSI recovering strongly from the oversold zone, indicating a decent rise to signal a buy has much upside potential visible from current levels."

With the chart looking good, PL's analyst said, "We suggest buying and accumulating the stock for an upside target of 2100-2300 levels for the medium to short term time frame."

Further, Antique Stock Broking's note said, "Our interaction with the management of HDFCB suggests (1) Integration with HDFC Ltd. has been relatively seamless, reflected in post-merger RoA of 1.9%, and though there are few operational challenges, they are manageable and synergy benefits would flow overtime, (2) Retail credit cycle is strong, barring a few pockets of small-ticket personal loans (PL); despite change in RWA on unsecured loans, the bank would continue to grow within its risk framework and risk pricing in PL may get better, (3) CASA franchise is strong, nevertheless industry led slowdown implies that near-term growth would be driven by term deposits (TDs)-this too would help the bank, as over a period of time, as TDs would replace relatively higher cost borrowings, (4) NIM headwinds stays for the industry and would impact HDFCB too, but with levers available, the bank would be better placed than some of the peers, and (5) It is utilizing benefits of a low credit cost cycle, which can continue for 1-2 years, to invest and expand its network to create growth engines.

Also, Antique's note said, "In our view, the bank could deliver a RoA of 1.9% and RoE of 16%-17% (earnings expectation largely unchanged) over FY24/ 26E and we maintain BUY with an unchanged TP of INR 1,975 (valuing the bank at 2.7x 1HFY26 BV and INR 187 for subsidiaries, vs. long period average one-year forward P/BV of 3.3x)."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.