Ambit, Edelweiss, Haitong Securities, Investec, Jefferies, Kotak Institutional Equities, Macquarie and Morgan Stanley raised target price by 2-22%.
The bank on Saturday reported an 18.4% rise in standalone net profit at Rs 7,513.2 crore, while Net Interest Income jumped 16.7% and asset quality improved.
“HDFC Bank management painted a very positive outlook for the bank when it comes to asset quality,” said Macquarie, raising target price by 22%.
“The bank is also pleasantly surprised by overdue/NPA recoveries across different product segments…with such strong collections, we do believe there is significant upside to our earnings numbers,” said Macquarie.
Investec, which raised target price by 13.4% to Rs 1425 while retaining a buy rating, said asset quality disclosures from HDFC Bank have been significantly better than peers. It is a reflection of its superior customer franchise and better credit underwriting.
“With a near 97% demand resolution and very little restructuring pipeline, HDFC Bank has demonstrated that asset quality is not a major concern any more. Valuations will soon anchor to growth where the ask rate is quite high for the next 2-3 quarters due to high base effect,” said HDFC Bank.
While most brokerages have maintained buy, outperform or overweight ratings, Ambit has maintained a sell recommendation. Its target price increase for HDFC Bank is also the lowest on the Street at 2%.
Ambit expects HDFC Bank’s asset quality to deteriorate due to COVID-19 given its exposure to stressed sectors. In the retail segment, it has high exposure to potential stressed sectors like microfinance, agri, CV/CE, and unsecured loans.