HDFC Bank: Will this stock outperform peers post Q2 results? Here are target prices

Stock analysts are largely positive on HDFC Bank, with a few expecting the stock to outperform peers, following the private lender's second quarter results. They largely retained 'Buy' recommendation on the stock. The bank posted a steady Q2 with an earnings beat, aided by healthy net interest income (NII) and robust treasury gains. Net interest margin (NIM) moderated 8 basis points sequentially and are expected to pick up going forward. Loan growth has started gaining traction, which led the CD ratio to increase to 98 per cent but the management expects this to reduce below 90 per cent in the medium term. Slippages moderated, while recoveries were healthy, enabling a decline in core credit cost.

MOFSL noted that HDFC Bank has made additional contingency provisions of Rs 1,500 crore and maintained its floating provisions of Rs 21,400 crore, taking the total such provisions to Rs 38,100 crore, which is 1.4 oer cent of loans.

"The gradual retirement of high-cost borrowings, along with an improvement in operating leverage and the provision buffer, will support return ratios over the coming years. We fine-tune our earnings estimates for FY27 and estimate HDFC Bank to deliver FY27E RoA/RoE of 1.84 per cent/14.3 per cent. Reiterate BUY with a target price of Rs 1,175," MOFSL said.

Jefferies raised its target price on the stock to Rs 1,240 from Rs 1,200, reiterating a Buy call. Emkay Global also maintained its positive stance, increasing its target to Rs 1,225 from Rs 1,150, citing continued balance-sheet strength and stable margins. Similarly, Investec revised its target price to Rs 1,160 (from Rs 1,130) and kept a Buy rating intact, while Axis Capital lifted its target to Rs 1,170 (from Rs 1,150).

Nuvama Institutional Equities said non-performing loans (NPLs) for HDFC Bank fell sharply due to lower slippage and a lumpy upgrade of 10bp of loans. Core credit cost decreased sharply from 56 bps to 28 bps, but total credit cost was 52 bps against 2.2 per cent QoQ.

"Retain ‘BUY’. We are revising target price to Rs 1,170/3.1x PBV from Rs 1,135. HDFC Bank has already scaled up growth to system level and we expect NIM to improve Q3FY26 onwards. Given superior asset quality and improving core earnings, we reckon the stock shall outperform peers," Nuvama said.

Nirmal Bang said it is positive on HDFC Bank for the long term due to its best-in-class asset quality, growth potential (because of a good capital position), potential for margin improvement and merger synergies in the long term. In addition, a non-specific provision buffer at 1.8 per cent of the loan book provides comfort, it said.