Buy HDFC Bank; target of Rs 2125: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Bank

HDFCB saw soft quarter as core PAT was 3.0% lower to PLe due to lower fees and NII. Adjusted for tax refund, NIM at 3.53% was 4bps lower to PLe. However, asset quality was better as GNPA declined by ~8bps QoQ to 1.33% owing to lower net slippages. LDR declined over FY24 to FY25 from 104.5% to 96.5% but further reduction may happen at a slower pace in FY26 as credit growth would pick-up. Bank has guided to reach LDR of 85-90% in FY27; we are factoring LDR to reach 92.5%/89.0% in FY26/27E which would imply a loan CAGR of 10%. Due to RBI accommodative stance, we revise our repo rate cut assumption to 75bps from 50bps and trim NIM for FY26/27E by 11/5bps; however overall NII/core PAT may not change materially. PSLC cost remains a key monitorable.

Outlook

We raise our SOTP based TP to Rs 2,125 from Rs1,950 as we roll forward to Mar’27 core ABV and tweak multiple to 2.4x from 2.3x. Retain ‘BUY’.