 "HDFC Bank stock up 3% post Q2 results as analysts raise share price target")
HDFC Bank share price target: Brokerages have unanimously raised the share price target of HDFC Bank stock after the lender reported better-than-expected July-September quarter (Q2) results for the financial year 2024-25 (FY25).
Analysts, now, forecast HDFC Bank share price target for the next one-year between Rs 1,900 and Rs 2,150. This implies a maximum upside of 24.6 per cent, from current levels, till around October 2025.
"Q2 FY25 results of HDFC Bank bore resemblance to the bank's pre-Covid earnings, where earnings delivered no surprises, negative or positive. With near-flat margin and improved credit costs, the lender appeared immune to sector-wide troubles," analysts at Bernstein reportedly said.
They maintained their 'Outperform' rating on the stock with a target price of Rs 2,100.
On the bourses, HDFC Bank share price on the NSE today rallied 3.9 per cent to an intraday high of Rs 1,748.15 per share. By close, however, the stock pared some gains to end at Rs 1,725, up 2.57 per cent, as against a 0.29 per cent fall in the benchmark Nifty50 index.
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On Saturday, India's largest private lender, HDFC Bank, said that its net profit increased 5.3 per cent year-on-year (Y-o-Y) to Rs 16,820 crore in Q2 FY25, beating Street estimates of a flat bottom line.
Operationally, HDFC Bank's net interest income (NII) jumped 10 per cent on year to Rs 30,110 crore. Net interest margin (NIM) was flat at 3.46 per cent in Q2 FY25 as against 3.47 per cent in Q1 FY25.
On the business side, loans grew at 1.3 per cent quarter-on-quarter (Q-o-Q) and 7 per cent Y-o-Y as the bank focussed on managing its loan-to-deposit ratio (LDR). Muted loan growth was aided by slower growth in home loans and a 3-per cent Q-o-Q dip in corporate book.
On the deposit side, growth was seen at 5.1 per cent Q-o-Q and 15 per cent Y-o-Y, while the current account-savings account (CASA) ratio declined 70bp Q-o-Q to 35.3 per cent.
With this, LDR declined by 375 basis points (bps) Q-o-Q to 99.8 per cent.
"The bank shall achieve the pre-merger LDR of around 86 per cent in three years versus four earlier. The negative of low loan growth is fully priced in while resilient credit quality and deposit share gains shall become key strengths in the current environment," said analysts at Nuvama Institutional Equities.
The brokerage has raised HDFC Bank share price target for 2025 by 6 per cent to Rs 1,950. It values the stock at 2.3-time book value based on FY26 earnings estimates. It maintained its 'Buy' rating on the stock.
LDR improvement in focus
The gradual improvement in LDR, analysts said, is the "best possible outcome" in the current environment.
"Concerns on unsecured loans do not appear to be meaningful as yet to shift our stance. We build an investment argument that in two-to-three years, it would re-emerge as one of the best-in-class banks," Kotak Institutional Equities said.
The brokerage opines that the relative stock underperformance is likely to be capped as there is visibility of earnings improvement ahead.
Changes in earnings estimates
Given that HDFC Bank posted a steady performance in Q2 FY25, marked by stable margins and healthy asset quality, strong deposit growth, and muted advances growth, analysts at Motilal Oswal Financial Services estimate LDR to improve to 97.1 per cent in FY25 and 92.2 per cent in FY26. It has a 'Buy' rating on the stock with a share price target of Rs 2,050.
Nuvama Institutional Equities, meanwhile, has increased net profit estimate for FY25 and FY26 by 3 per cent and 4 per cent, respectively.