Buy HDFC Bank; target of Rs 1440: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on HDFC Bank

NII was at Rs 13515 crore on the back of healthy growth in advances. Margins came off ~10 bps QoQ to 4.2%, owing to maintenance of higher liquidity coverage ratio (LCR) and higher accretion in term deposit. Other income growth remained robust at 39% YoY to Rs 5587 crore, led by 23% YoY growth in fee income and treasury income. Higher distribution of insurance products offset yield pressure from the mutual fund business. Provisions remained elevated at ~30 bps of advances to Rs 2700 crore, including Rs 663 crore of contingent provision. As beneficiary of a reduction in tax rate, the bank reported PAT at Rs 6345 crore, up 27% YoY, after adjusting for DTA. Overall, asset quality stayed steady with GNPA at Rs 12508 crore and GNPA ratio at 1.38%. The bank holds floating provision at Rs 1450 crore.

Outlook

Given the general economic slowdown, near term pressure is evident. However, considering the focus on balance sheet growth maintaining superior asset quality, the bank is well poised to deliver consistently with margin leadership & robust return ratios. The bank remains a portfolio stock with premium valuations. Accordingly, we maintain our BUY rating with a revised target price of Rs 1440 valuing bank at ~24x FY21E EPS (3.9x FY21E ABV) and include Rs 75 per share for HDB Financial Services.

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