Shares of HDFC Bank continued gaining streak for the sixth straight session on Tuesday, with the share price rising nearly 7.5% during this period as investors cheered its strong earnings for the third quarter ended December 2022. The banking heavyweight maintained its upward momentum as most analysts suggest buying or holding the counter following the Q3 earnings report. In comparison, the BSE Sensex and the S&P BSE Bankex index rose nearly 2% in the last six sessions.

Extending its rally, HDFC Bank shares opened higher at ₹1,677.70 today, against the previous closing price of ₹1,672.65 on the BSE. During the session so far, the stock gained as much as 1.75% to hit a 9-month high of ₹1,702 intraday, while the market capitalisation climbed to ₹9.44 lakh crore.

HDFC Bank share price is just nearly 2% away from its 52-week high of ₹1,721.85 touched on April 4, 2022. It hit a 52-week low of ₹1,271.75 on June 17, 2022.

Given the recent uptrend and the trendline pattern on the weekly charts, market analysts expect the banking stock to breach its record high levels in 3-6 months and head towards ₹1,800 marks.

Despite the recent rally, HDFC Bank, the country’s largest private sector lender by assets, has underperformed the banking index in the last one year by delivering a return of 11.2% as compared to 12.8% growth in the BSE Bankex index. The banking heavyweight has risen 21% in the six month period and 17.6% in the last three months. In the last one month, the counter has risen 4% as against 0.8% rise in the BSE benchmark Sensex and 0.2% fall in the BSE banking index.

The recent rally in HDFC Bank shares can be attributed to solid December quarter earnings, which was driven by strong improvement in interest income as well as lower provisions. For the third quarter ended December 31, 2022, HDFC Bank posted a 19.9% year-on-year (YoY) growth in consolidated net profit to ₹12,698 crore on the back of strong improvement in interest income as well as lower provisions. The net interest income (NII) climbed 25% YoY to ₹22,987.8 crore, supported by rise in lending rates following RBI’s interest rate hikes.

On the asset quality front, HDFC Bank saw its gross non-performing asset (NPA) ratio falling to 1.23% from 1.26% in the year-ago period. The net NPA too declined to 0.33% from 0.37% in the same period last year. However, on a sequential basis, the NPA ratios were flat. The bank’s provisions and contingencies fell marginally to ₹2,806 crore in Q3 FY23 from ₹2,994 crore last year.

Post Q3 results, LKP Securities recommended “BUY” on the stock with a price target of ₹1,869, citing the bank's superior underwriting practices, higher liquidity, adequate coverage and strong capital position. “HDFC Bank is expected to outperform the sector in the long run led by healthy balance sheet growth; much higher provision than regulatory requirement in the balance sheet; best in class underwriting and risk management practices. Given these strengths we expect HDFC Bank to remain one of the best among all the lending business,” the brokerage said in its report.

ICICI Direct also remained positive and retained “BUY” rating on the HDFC Bank shares with a target price of ₹1,920, a potential upside of 11% from the current market price. Building of distribution capabilities and business growth to remain buoyant though merger with HDFC Ltd to remain in focus in the near term, the agency said.

“HDFC Bank is expected to deliver higher than industry growth along with RoA of around 2% in FY25E. Rolling to FY25E, we value HDFC Bank at around 2.8x FY25E ABV & ₹50 for subsidiaries and revise our target price from ₹1,750 to ₹1,920 per share,” it said in a note post Q3 release. 

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