HDFC Bank Earns 'BUY' Call With Rs 1150 Target From Prabhudas Lilladher

BROKERAGE-REPORTS

Overview

Prabhudas Lilladher has initiated a 'BUY' rating on HDFC Bank, setting a target price of Rs 1150. The bank posted a strong quarter, exceeding expectations with robust Net Interest Income and NIMs. Asset quality remains healthy. However, analysts express caution regarding the bank's ability to capture significant deposit market share to meet future growth targets.

Strong Quarterly Performance

The bank’s core Profit After Tax (PAT) for the quarter exceeded expectations by 5.9%, reaching ₹156.5 billion. Net Interest Income (NII) also posted a 1.2% beat against estimates, bolstered by an 8 basis point sequential increase in reported Net Interest Margins (NIMs). Asset quality was robust, marked by lower net slippage and a ₹10.4 billion contingent provision reversal driven by improved credit performance from a large corporate client.

Analyst Outlook and Concerns

Looking ahead, Prabhudas Lilladher factors in approximately a 12% loan Compound Annual Growth Rate (CAGR) over FY26-28E. However, analysts express circumspection, noting that achieving the bank's guidance would necessitate capturing over 20% of the incremental deposit market share. This may prove challenging in the current financial environment.

Valuation and Recommendation

The brokerage maintains a valuation multiple of 2.5x on September 2027 core Adjusted Book Value (ABV). Based on a Sum-of-the-Parts (SOTP) valuation, the target price is retained at ₹1,150. Consequently, Prabhudas Lilladher reiterates its 'BUY' recommendation for HDFC Bank shares.

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