Buy HDFC Bank; target of Rs 1,900: Sharekhan

Sharekhan's research report on HDFC Bank

HDFC bank delivered stable performance in Q1FY25 except on deposit front and maintained its stance of staying focus on delivering stable business matrices in FY25. However, deposit growth remains a key monitorable. Bank expects loan-to-deposit ratio (LDR) to normalise faster, while maintaining profitability over the next couple of quarters. Thus, the bank would continue to see muted loan growth. We believe this is the right strategy during the transition. Asset quality slightly deteriorated but the bank does not see any concerns and expect asset quality to remain rangebound.

Outlook

We maintain our Buy rating on the stock with an unchanged TP of Rs. 1,900. The stock trades at 2.1x/1.9x its FY2025E/FY2026E core BV estimates. Loan growth is expected to remain muted in the near term and deposit growth is expected to outpace loan growth, which should bring the LDR to a normal level gradually. FY25 would be yet another period of transition. The bank is confident of regaining its growth trajectory and NIMs once this transition period is completed. We retain a Buy rating on the stock with an unchanged price target (PT) of Rs. 1,900 as downside risk appears to be a minimal from hereon. Key monitorable: NIM progression and retail deposit mobilisation.