HDFC Bank Share Drops 17%, ADR Falls 20% YTD; Yet Morgan Stanley Maintains 'Overweight' For Rs 2,110 TP

The year 2024 so far has been a slippery slope for India's largest bank in terms of market share, HDFC Bank both domestically and globally. Year-to-date, HDFC Bank's share price have dropped nearly 17% on BSE, while its American Depositary Receipts (ADR) have plummeted by a huge 20%. Sentiments in HDFC Bank blistered after its interest income missed the street's estimates in Q3FY24, while margins came in dull. Despite the bearish trend, global brokerage Morgan Stanley has maintained an overweight with a 'Positive' outlook on the private bank.

This could only mean that the recent declines in HDFC Bank bring in buying-on-dips opportunities. It needs to be noted that the majority of brokerages are optimistic about HDFC Bank's long-term growth prospects, and some of them do believe the bank's share price could touch a target price of over Rs 2,100 including Stanley.

On BSE, HDFC Bank's share price ended at Rs 1,419.90 apiece, up by 0.44% on February 16. In the latest trading week that concluded, HDFC Bank shares only saw half a per cent upside on BSE.

Since its Q3 results, HDFC Bank has lost massive market value. On the day it declared its Q3 which was January 17, 2024, HDFC Bank enjoyed a market cap of Rs 12,74,738.64 crore.

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. On the top-line front, the bank's net interest income (NII) saw a growth of 24% YoY to Rs 28,470 crore. Moreover, the bank's core net interest margin was at 3.4% on total assets, and 3.6% based on interest-earning assets.

But now, HDFC Bank's market cap is around Rs 10,78,493.29 crore. In a month, HDFC Bank has lost about Rs 1,96,245.35 crore of its market valuation.

Year-to-date, HDFC Bank's share price dived by 16.51% on BSE. Its ADR have also taken massive bearish heat, and toppled by 19.83% on NYSE.

And yet, this dive into HDFC Bank only brings the opportunity to make fresh buying.

Morgan Stanley is the latest to initiate coverage on HDFC Bank. The brokerage maintained 'Overweight' on the bank with a target price of Rs 2,110 per share. The outlook is positive. This will be a nearly 49% potential upside in HDFC Bank from its current price level.

Stanley believes that accelerated market share gains are likely to lift CASA cross-selling, while it needs to be noted that HDFC Bank's turnaround time has improved.

Last month, brokerage Ashika Group also set a target price of Rs 2,110 per share on HDFC Bank.

Analysts at Ashika in their research note said, "Efficiently managing the assets and liabilities of erstwhile-HDFC Ltd. (e-HDFC Ltd.) through over the transition to a bank is a testament to HDFC Bank's exceptional execution capacity. Against this backdrop, the performance in 3QFY24 has more positives than negatives, in our view."

They added, "Notably, the bank is gradually normalizing its operations post-completion of the merger, and we expect the benefits of the merger to become evident from 4QFY24 onwards, which would enhance the bank's performance and bring back investors' confidence. Thus, we continue to remain positive on HDFC Bank and maintain BUY rating with an unrevised Target Price of Rs2,110."

HDFC Bank currently holds the highest weightage in Nifty 50 compared to other biggies, at a staggering 13.52% by the end of 2023. Reliance and ICICI Bank follow with weightage of 9.20% and 7.36% respectively.

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.