HDFC Bank Q4 Results Review: Operating Leverage Aids Earnings — Dolat Capital Maintains 'Accumulate', Hikes TP

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Dolat Capital Report

HDFC Bank Ltd. reported a robust quarter with better-than-expected opex and contained credit costs driving core earnings. Net interest margin at 3.54% (+11 bps QoQ) benefited from one-off interest on IT refund and sequentially lower interest reversals. Core NIM at 3.46% (+3 bps) were largely stable QoQ. Gross non performing asset ratio moderated QoQ by 9 bps, along with broad based sequential loan growth.

Margins factor in benefits on cost of funds from reduced e-HDFC borrowings and limited re-pricing impact on EBLR-linked loans. The full impact of the 50bps rate cut is expected to be visible in Q1 FY26. Loan growth is guided to be closer to the system in FY26E, with expectation for LDR to normalize in the 85-90% range by FY27E. Management remains confident on the strength of asset quality metrics.

We tweak earnings, factoring in slightly lower NIM for FY26E, offset by improved opex assumptions. Maintain ‘Accumulate’ rating with revised target price of Rs 2,100, valuing standalone bank at 2.4x FY27E PBV (from 2.3x earlier) and adding subsidiary value.

Valuations benefit from increased confidence in asset quality metrics. We look for higher business growth for a stronger stance.

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