Shares of HDFC Bank experienced profit booking in July after a decent 6% gain in June ahead of its merger with HDFC. Although the stock has dipped nearly 2% in July compared to a 2% gain in the Sensex, analysts and brokerage firms maintain a positive outlook for the medium to long term, citing the synergistic nature of the HDFC and HDFC Bank merger.
HDFC Bank merged with HDFC on July 1, 2023. In its June quarter's business updates, the bank reported that the merged entity's gross advances reached approximately ₹2,245 crore, reflecting a 13.1% increase over the previous year. The merged entity's gross advances, excluding wholesale advances, stood at around ₹2,136.5 crore, growing by 15.3% YoY. Deposits also showed a positive trend, aggregating approximately ₹2,063.5 crore, a 16.2% YoY rise.
Analysts are optimistic about HDFC Bank's prospects. Morgan Stanley resumed coverage on the stock with an 'overweight' view and a target price of ₹2,110, anticipating a 26% upside. They emphasized the bank's attractive valuation and potential for strong execution on deposit growth.
Jehan Bhadha, Senior AVP of Equity Research - Retail at Nirmal Bang, highlighted HDFC Bank's robust business growth, resulting in consistent market share gains. Bhadha expects the bank to continue expanding its branch network and digital capabilities, projecting 18% credit growth in the coming years.
Incred Equities also holds a positive outlook, expecting HDFC Bank to outperform peers in terms of growth and margins. They believe the bank will benefit from deeper penetration driven by branch expansion. The brokerage firm maintains an 'add' rating on HDFC Bank with a target price of ₹2,000.
Despite the short-term profit booking, analysts are confident in the merger's benefits and HDFC Bank's future growth prospects, making it an attractive long-term investment.
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