Buy HDFC Bank; target of Rs 2300: Emkay

Emkay's research report on HDFC Bank

HDFC Bank is gradually stepping up credit growth, although margin slipped by 23bps QoQ from a higher base in 4Q due to swift rate cuts and lower interest on IT refund. The bank registered one-off gains from HDB Fin OFS in the IPO which it prudently utilized to shore-up floating/contingent provision buffer to the tune of Rs107bn, with o/s now at Rs366bn/1.4% of loans; this hence makes the balance sheet (BS) much more resilient. With liquidity improving, HDFCB guides to further accelerate growth in H2FY26, in line with the system, and outpace the system growth in FY27 and thus reduce the growth gap with large peers. This, along with shifting portfolio mix toward retail/SME and substitution of high-cost eHDFCL borrowings with deposits, should drive-up the bank’s margins over FY27-28E and in turn the RoA to 1.9-2%. We retain BUY on HDFCB,

Outlook

While revising up our TP by ~5% to Rs2,300 (valuing the standalone bank at 2.5x Jun-27E ABV, and subs at Rs250/sh).