Emkay Global Financial Services has retained its ‘Buy’ rating on HDFC Bank, with a target price of ₹2,100, implying a potential upside of 18.16% from its current market price of ₹1,777.10.
The brokerage emphasizes the bank’s strong fundamentals, highlighting its healthy return on assets (RoAs), robust provision buffers, and capital adequacy, which justify its safety premium.
Key initiatives discussed include HDFC Bank’s plan to lower its loan-to-deposit ratio (LDR) to the pre-merger level of ~85% from the current 100%. The bank intends to achieve this by moderating credit growth and accelerating deposit mobilization. Additionally, the management reiterated its focus on customer satisfaction, improving technology, reducing regulatory friction, and minimizing employee attrition.
While near-term pressures due to a falling LDR and higher costs of funds (CoF) could impact margins, Emkay projects margin recovery in the long term. This recovery is expected to be driven by a better portfolio mix and reduced reliance on borrowings, currently accounting for 8-9% of liabilities.
Emkay anticipates HDFC Bank to grow at sub-system levels in FY25, align with the system in FY26, and outperform by FY27.
Disclaimer: The above information is based on the brokerage report and does not constitute financial advice. Investors are advised to consult with a financial advisor before making investment decisions.