'Buy' HDFC Bank Shares To Get An Upside Of 22% Says Motilal Oswal —Here's Why

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. 

Motilal Oswal Report

HDFC Bank Ltd. has intentionally slowed down its business growth and has maintained a healthy pace of liability accretion amid a very challenging macro environment. The bank has been delivering a resilient performance on asset quality supported by its robust underwriting and strong understanding of market cycles.

Over the past few quarters, the margins have remained within a narrow range aided by improving asset mix and retirement of high-cost borrowings, though the CASA mix continues to remain under pressure. Asset quality remains broadly stable with PCR at ~70%.

The bank holds a healthy pool of provisions (floating + contingent) at Rs 259 billion/ 1.0% of loans. While management has not given any specific guidance on the credit/deposit ratio, it has indicated that it will actively focus on bringing the ratio down at an accelerated pace.

Consequently, we have factored in loan growth of 9.5%/13% over FY26/FY27E, while deposit CAGR is likely to sustain at ~15%. However, the gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will aid calibrated expansion in RoA over the coming years.

We thus estimate HDFC Bank to deliver FY27E RoA/RoE of 1.8%/14.2%. We reiterate our Buy rating on the stock with a target price of Rs 2,050 (premised on 2.3x FY27E ABV + Rs 290 for subsidiaries).

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.