HDFC Bank, India's third most valuable stock, has seen a significant decrease in its share price over the past week. The bank's shares dropped 7.98% to ₹1,529.20 each by Friday from ₹1,661.90 on the previous Thursday. This fall equates to a decline of approximately ₹99,835 crore in market capitalization, bringing the bank's total market cap to ₹11,59,154.60 crore (INR100 crore = approx. $12 million).
The bank's share price has been on a four-day consecutive fall due to an unexpected dip in net worth and concerns regarding the quality of assets in the near term, margins, and return on asset (RoA).
On Tuesday, September 20, several brokerages adjusted their target prices for HDFC Bank's stock due to these emerging pressures. Kotak Institutional Equities revised their goal from ₹1,925 to ₹1,850; Antique Stock Broking from ₹2,025 to ₹1,925; Phillip Capital from ₹1,960 to ₹1,880; and Nirmal Bang from ₹2,140 to ₹1,935.
Emkay Global noted that HDFC Bank is planning for measured growth in the near future. The bank aims at building granular liability to replace HDFC's high-cost borrowing and expanding the mortgage business from the bank's platform. This strategy is expected to normalise margin/RoA and improve RoA/RoE from 1.9%/15.8% in FY24E (merged) to 2% /17.3% by FY26E as merger synergies take effect.
JM Financial also adjusted its predictions for HDFC Bank's earnings per share (EPS) for FY24/FY25 by 1-2%, reflecting the lower opening net worth of HDFC. Despite this adjustment, the brokerage maintains its 'Buy' recommendation for the bank's shares with a target price of ₹1,850.
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