Buy HDFC Bank; target of Rs 1900: Sharekhan

Sharekhan's research report on HDFC Bank

HDFC Bank’s business update for Q2FY2025 indicated that deposit mobilisation (up 15.1% y-o-y/5.1% q-o-q) has been strong (above estimates), led by term deposits (19.3% y-o-y/6.7% q-o-q). CASA grew by 8.0% y-o-y/2.3% q-o-q. CASA ratio stood at 35.3% vs. 37.6% y-o-y/36.3% q-o-q. Gross advances grew by 7.0% y-o-y/1.3% q-o-q. Given the focus is on normalisation of the credit-deposit ratio faster, this is an excellent outcome considering the transition period. Asset growth would remain calibrated in the near term, while managing LCR and LDR. At the CMP, the stock trades at 2.2x and 1.9x its FY2025E and FY2026E core BV estimates, respectively.

Outlook

We maintain our BUY rating with an unchanged PT of Rs. 1,900. Retail deposit growth and NIM progression remain key monitorables.