Buy HDFC Bank; target of Rs 2200: Emkay Global Financial

Emkay Global Financial's research report on HDFC Bank

After growth calibration for the past one year, and under pressure to bring down LDR and manage PSL/margins, HDFC Bank reported better credit growth in 4Q at 5% YoY/4% QoQ as well as stable core margins. We believe HDFCB would be the key beneficiary of the easing regulatory stance on LDR and liquidity which should reflect in better growth in FY26; this would thereby reduce the bank’s growth gap with peers and thus ease investor concern. Despite swift policy rate-cuts and PSL pressure, the bank remains hopeful of keeping margins range-bound in FY26, led by an improving portfolio mix toward retail/SME, lower share of borrowings, and substitution of high-cost eHDFCL borrowings with deposits. This, coupled with continued lower LLP and opex management, is likely to help the bank deliver 1.8-1.9% RoA over FY26-28E. Further, the listing of HDB Fin (RBI deadline: Sep-25), and hence value un-locking, should be a positive catalyst.

Outlook

We retain BUY on HDFCB, while revising up our TP by ~5% to Rs2,200 (standalone bank at 2.5x FY27E ABV, and subs at Rs280/sh).