1:10, 1:1 Stock Splits: Rs 250-To-Rs 1,400, HDFC Bank Multiplies Investors Money; Buy For Rs 2,100 Target

India's largest bank in terms of market share, HDFC Bank has witnessed a see-saw-like sentiment so far in 2024, from investors after its Q3 results for FY24. Year-to-date, both HDFC Bank's share price and ADR have dropped by double digits. But despite the latest hiccups, HDFC Bank is a star in its sector, a multi-bagger that not only increase the number of shares for investors but has provided triple-digit returns since its first stock split.

Not many are aware, but HDFC Bank went ex-split not once but twice, and investors who grabbed the opportunity of two stock splits are currently sitting on hefty gains. There is more potential upside in HDFC Bank despite the latest volatility, and hence, when the share price of the largest bank is down, you grab the opportunity.

As RBI says, HDFC Bank is among 'Too Big To Fail Banks', so it's mostly about finding the right opportunity for fetching huge returns on your portfolio because blue-chip has the potential. The highest target price in HDFC Bank is set at Rs 2,100, which will be an upside of over 46% ahead.

HDFC Bank Share, ADR:

After falling for two consecutive days, HDFC Bank's share price traded at Rs 1,427.75 apiece, up by 0.6% with a market cap of Rs 10,84,489.62 crore. The stock gained over 1% with an intraday high of Rs 1,433.95 apiece.

The bank's ADR also inched by over 0.5% overnight.

Year-to-date, HDFC Bank's share price has dipped by 16.12% on BSE, and ADR has tumbled nearly 19%.

HDFC Bank Stock Splits Charm:

HDFC Bank's first-ever stock split was in 2011. The bank turned ex-split on July 14, 2011, for a ratio of 1:5. Accordingly, HDFC Bank's Rs 10 per share face value was trimmed to Rs 2 per share. So if an investor held 500 shares of HDFC Bank before July 14th, their number of shares will rise to 1000 post ex-split.

On the first ex-split day, adjusted to the ratio of 1:5, HDFC Bank's share price was at Rs 252.98. So on this price level, your 1,000 shares of HDFC Bank were valued at Rs 2,52,980. But from the current market price, your shareholding has risen to a whopping Rs 14,27,750, this will be multi-fold returns on your portfolio.

Further, the second stock split was simply a cherries on the cake. It also needs to be noted that the second stock split was a couple of years ago.

The next time HDFC Bank's share price turned ex-split was on September 19, 2019, in the ratio of 1:1. This meant that Rs 2 per share face value was halved to Rs 1 per share. Assuming you haven't modified your shareholding in HDFC Bank from the first stock split, then your number of shares will double to 2,000 on the face value of Re 1.

So your 2,000 shares holding in HDFC Bank will be valued at Rs 22,02,100 at the share price of Rs 1,101.05 on the second ex-split day.

From the first stock split, your number of shares rises by 1,000 and your shareholding value increases by 770.

Time skip to now, your 2,000 shares in HDFC Bank, if not modified still, is now valued at Rs 28,55,500, an increase of nearly 30% in shares value compared to the second stock split. But compared to the first ex-split price, the value of the shares in HFDC Bank rises by a mind-boggling 1,028.74%.

From the first stock split price level to now, HDFC Bank has given 464.37% returns so far.

HDFC Bank Earnings:

In Q3FY24, HDFC Bank's net profit came in at Rs 16,372 crore, registering a growth of 33% from Rs 12, 259 crore a year ago same quarter. While its net interest income (NII) saw a growth of 24% YoY to Rs 28,470 crore. While the bank's core net interest margin was at 3.4% on total assets, and 3.6% based on interest-earning assets.

Should You Buy?

The highest target price in HDFC Bank is by Bernstein. The brokerage has maintained 'Outperform' with a Neutral outlook on HDFC Bank for a target price of Rs 2,100 per share. Meanwhile, maintaining a neutral stance on HDFC Bank, Citi maintained BUY for a target price of Rs 2,050.

Further, after Q3 results, Deven Choksey in its research note said, "The borrowings for the quarter saw a further sequential increase of 2.9%. Thus, we believe that at these levels, the reduction in borrowings will be at a slower pace as a recovery in deposit growth is yet to be seen. However, in the medium to long term, the
management expects the borrowings will be partially superseded by deposits eventually, which will help to improve the margins. We have reduced our EPS estimates for FY24E/ FY25E by 3.1%/ 2.7%, respectively. We have introduced FY26E estimates and rolled over our valuation based on the adjusted book value of FY26E. We have maintained a "BUY" rating on the shares of HDFC Bank Ltd."

Deven Choksey has set a target price of Rs 1,950 on HDFC Bank. A similar target price is set by Motilal Oswal as well on the bank.

Moreover, Kotak Institutional Equities has maintained a buy on HDFC Bank for a target price of Rs 1,860. Lastly, JM Financial has recommended buying for a target price of Rs 2,010 apiece.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor 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.