Buy HDFC Bank; target of Rs 2,000: Emkay

Emkay's research report on HDFC Bank

After the Q3 miss, HDFCB largely ticked all the boxes in Q4 – delivering betterthan-expected deposit growth (over Rs1.7trn QoQ), positively surprising on the margin front (over 3bps QoQ) to 3.63% despite the sharp fall in LDR to 104% and accelerated branch expansion. HDFCB utilized HDFC Credila’s stake sale gains of Rs73bn and tax reversal due to favorable court order to shore-up contingent provision buffer (over Rs109bn QoQ) to 1.1% of loans. However, higher staff cost due to ex-gratia provision led to a 3% PAT miss at Rs165bn. Going forward, as per management, ramping up retail deposits and margin management amid potential pressure from lower incremental LDR/inorganic PSL build-up (from Oct-25) to meet sub-targets will take precedence over credit growth. Factoring in slower growth, we have trimmed our earnings estimates for FY25-26E by ~7%.

Outlook

However, we retain BUY with a revised TP of Rs2,000 (earlier Rs2,100), valuing the standalone bank at 2.5x Mar-26E (from 2.7x Dec25E), partly offset by better subs. valuation (Rs250/sh vs. earlier Rs190/sh).

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