CLSA Sees 28% HDFC Bank Upside, Urges Investors to Buy Dip
Overview
CLSA maintains an 'Outperform' rating on HDFC Bank, setting a ₹1,200 price target that signifies a 28% potential gain. Despite recent stock declines and investor concerns about moderating deposit growth and rising loan-to-deposit ratios (LDR), the brokerage firm views these issues as temporary. CLSA anticipates a significant 'bounce-back' year for the bank in fiscal year 2027, presenting an opportune moment for investors.
Stocks Mentioned
CLSA maintains its 'Outperform' rating on HDFC Bank, setting a price target of ₹1,200. This implies a substantial 28% upside potential from current trading levels. The bank's stock has faced pressure, experiencing a 6-7% correction since its third-quarter operational update, with Q3 results scheduled for Saturday, January 17.
Analyst Conviction Amidst Concerns
CLSA's assessment follows investor feedback indicating moderated deposit growth and a loan-to-deposit ratio (LDR) climbing to nearly 99%. This LDR level exceeds the bank's internal guidance, which aimed to keep it below 90%. Furthermore, investors noted a lack of significant margin improvement post-merger, even after refinancing wholesale bonds with deposits.
Temporary Headwinds Expected
The brokerage firm believes most of these investor concerns are either misconceived or temporary in nature. CLSA projects fiscal year 2027 to mark a significant 'bounce-back' period for HDFC Bank. This optimistic outlook comes as the stock now trades at a 10-12% price-to-book discount relative to ICICI Bank.
Opportune Entry Point
CLSA suggests this dip presents an opportune time for investors to look past the immediate noise and invest in HDFC Bank's established franchise. The stock has seen a notable decline, falling in each of the last six trading sessions. Last week marked its worst performance since January 2024, when it dropped 10% in a single week. The lender's market capitalization stands at ₹14.48 lakh crore.
