Will HDFC Bank shares stage a comeback after recent underperformance? Target prices

HDFC Bank Ltd, the most-valued bank on Dalal Street, reported inline December quarter results, with a release of contingency provisions offsetting the impact of the new labour code. Given the stock’s recent underperformance versus the Nifty Bank over the past one month, analysts said the risk-reward had turned favourable and maintained their ‘Buy’ rating on the stock.

Elara Securities said HDFC Bank's Q4 profit was ahead of its estimates on higher treasury income, even as core pre-provision operating profit (ex-treasury) was in line with its estimates. 

"Characteristically Q3FY26 had steady undertones, underlying steady progress. Q3FY26 saw steady loan growth outcomes, up 12 per cent YoY & 2.7 per cent QoQ, with the bank confident of tracking above system growth in FY27. Q3 NIM surprised, up 8 bps QoQ, feeding into 3.4 per cent QoQ NII growth. Better liquidity scenario and changes in regulatory approach played in favor of HDFC Bank, making balance sheet realignment easier," the brokerage said. 

Nuvama said HDFC Bank reported a beat on core PPOP in Q3FY26, driven by higher core non-interest income and lower core operating expenses. It said higher trading gains were offset by a one-time wage provision related to the new labour codes.

The brokerage added that deposit growth came in lower than expected, which led to the loan-to-deposit ratio rising to 98.5 per cent. "Despite the miss in Q3, the CEO is confident of achieving year-end LDR of 95 per cent in FY26 and early-nineties in FY27E. Reiterate ‘BUY’ on likely improvement in deposit growth, improving NIM and superior asset quality. Our TP remains unchanged at Rs 1,170/2.7x BV FY27E," it said.

MOFSL expects the repricing of term deposits, along with an improvement in operating leverage, will support HDFC Bank's return ratios over the coming years. It fine tuned its earnings estimates and project HDFC Bank to deliver FY27 RoA and RoE of 1.9 per cent and 14.5 per cent, respectively. This brokerage retained its 'Buy' and a target of Rs 1,175 for HDFC Bank.

HDFC Bank has underperformed the broader Nifty Bank by 7 per cent in the past month. It traded at 1.9 times FY28 price to book value, rendering the risk-reward favorable, Elara said while suggesting a 'Buy' and a target of Rs 1,147.

JM Financial, meanwhile, downgraded the stock to 'ADD' and revised its target price to Rs 1,050  from Rs 1,160 earlier, valuing the core bank at 2 times FY28E standalone book value and applying a  15 per cent discount to ICICI Bank due to relatively lower growth.