HDFC Bank Branch (Photographer: Sucheta Das/Bloomberg)

HDFC Bank Stock Hits Record High As Brokerages Remain Upbeat Post Earnings 

Brokerages remained optimistic on HDFC Bank Ltd. even after the private lender delivered the second consecutive quarter of sub-20 percent profit growth.

While none of the leading brokerages changed their rating on the stock, a few including CLSA and Jefferies raised price targets citing a good performance on the asset quality front and the strong retail franchise.

Here are some brokerage views on HDFC Bank:

CLSA

  • Rating: Buy
Price target raised to Rs 1,830 from Rs 1,460.
  • Improvement seen in business with loan growth and fee growth.
  • Stressed loans among the lowest in the industry.
  • Lack of divergence between bank’s and RBI’s assessment of asset quality encouraging.
  • See 21 percent compounded annual growth rate in profit over the financial year 2016-17 to FY20.
  • Transition to IND AS accounting standard can drag earnings due to amortisation of employee stock option costs.

Jefferies

  • Rating: Hold
Price target raised to Rs 1,565 from Rs 1,475.
  • Maintaining current loan growth will be the key challenge going forward.
  • One of the better banks given the outlook on loan growth and asset quality.
  • Current valuation prices in all concerns.
  • Earnings per share estimates remain largely unchanged.
  • Forecast earnings growth of 21.1 percent CAGR over FY17-20E.
HDFC Bank Stock Hits Record High As Brokerages Remain Upbeat Post Earnings 

Macquarie

  • Rating: Outperform
  • Price target: Unchanged at Rs 1,735.
  • Remains top pick in the Indian banking space.
  • Strong growth profile, stable asset quality and high earnings visibility some key factors.
  • All fundamental parameters remain in solid shape.
  • Contribution of rural, semi-urban locations inching towards 18-20 percent of incremental business.

Motilal Oswal

  • Rating: Buy
  • Price target: Rs 1,790
  • Opportunities for significant gains in market share.
  • Best in-class asset quality.
  • Sharp pick-up in corporate loans impressive.
  • High current account-savings account ratio to keep net interest margin moderation limited.
  • Return on equity of almost 20 percent expected to be the best among private banks.

Edelweiss

  • Rating: Buy
  • Price target: Rs 1,734
  • Best in-class liability franchise and better asset quality places bank in a sweet spot to capitalize on emerging opportunities.
  • Digital focus will ensure bank delivers above-industry earnings growth.
  • 16-18 percent CAGR over FY17-19E will be lower than industry trend.
  • Superior retail franchise will drive outperformance in near to medium-term.
  • System-wide deterioration in the quality of retail assets, higher than expected outflow in CASA and change in macro environment, some of the key risks going ahead.

Shares of HDFC Bank rose 2.8 percent to a record high of Rs 1,539.1 as of 11:50 a.m. The stock has outperformed the S&P BSE Sensex Index in 2017, gaining 27.98 percent compared to 10.83 percent gains for the benchmark index.