'Add' HDFC Bank Shares Maintains Dolat Capital Post Inline Q1 Results, Hikes Target Price — Here's Why

When compared with large private banks, HDFC Bank reports its recovery from written-off accounts in the ‘other income' line vs the same being adjusted to provisions in case peer banks. Compared like to like, and adjusted for any one-offs across banks in Q1, HDFC Bank's credit costs stood at 40 bps vs 53/115 bps for ICICI Bank/Axis Bank.

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Dolat Capital Report

HDFC Bank Ltd. stands out for its strong execution and industry-best credit costs. Increased contingent provision at 1.4% of advances (highest amongst peers) provides additional comfort.

However, given the LDR constraints post-merger, growth trends could remain lower relative to large private peers over the medium term.

Nonetheless, with likely normalisation in credit environment, valuation premium vs peers should strengthen. Improvement in liquidity environment also works in favor of the bank given its large deposit requirement vs peers.

We value the standalone bank at 2.5x FY27E price/adjusted book value (from 2.4x earlier).

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