Accumulate HDFC Bank; target of Rs 2274: Deven Choksey

Deven Choksey's research report on HDFC Bank

For Q1FY26, Net interest income (NII) grew by 5.4% YoY (-2.0% QoQ) to INR 314.4 Bn., above our estimates by 4.8%, primarily driven by lower interest expenses on account of decline in cost of funds, reflecting efficient liability management. Pre-provision operating profit (PPoP) rose sharply by 49.6% YoY (+34.7% QoQ) to INR 357.3bn, above our estimates by 43.1%, driven by higher other income, positively impacted by realization of INR 100bn from stake sale in HDF Financial Services. Adjusted for the one-off other income, the PPoP stood at INR 257.3bn, above our estimates by 3.1%. Net profit for grew by 12.2% YoY (+3.1% Qo) to INR 181.6bn, above our estimates by 14.0%, driven by uptick in PPoP led by stake sale income, partially offset by accelerated provisions (~4.5x QoQ and ~4x our estimates).

Outlook

We HDFC Bank’s standalone business at INR 2,005.0 per share (based on 2.4x FY27E ABV), while we value its stake in the subsidiaries at INR 269.0 per share, implying a SOTP target price of INR 2,274. We reiterate our “ACCUMULATE” rating on the stock.

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