Buy HDFC Bank; target of Rs 1800: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on HDFC Bank

HDFC Bank (HDFCB) reported an in-line quarter, with PAT up 20% YoY, aided by a pick-up in NII growth due to 10bp QoQ expansion in margin. PPoP growth remained modest at 10% YoY, adversely impacted by a treasury loss of INR2.5b. However, Core PPoP growth was healthy at ~17% YoY in 2QFY23. Business growth remained healthy led by strong traction in Commercial and Rural Banking as well as Corporate book while Retail too grew strongly. HDFCB's asset quality ratios remained robust and witnessed a sequential decline led by moderation in slippages and healthy recoveries and upgrades. Restructured book too declined to ~53bp of loans in 2QFY23 (from 76bp in 1QFY23). Healthy PCR of ~73% and a contingent provision buffer (at 65bp of loans) provided comfort on asset quality. We estimate ~19% PAT CAGR over FY22-24, with an RoA/RoE of 2.0%/ 17.2%, respectively, in FY24.

Outlook

We expect the stock to perform gradually as revenue and margin revive further while the merger-related overhang ebbs as HDFCB looks to complete the merger by 1Q/2QFY24E. We maintain our BUY rating with a TP of INR1,800 (premised on 3x FY24E ABV).

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HDFC Bank - 171022 - moti