HDFC Bank, Q2FY25

HDFC Bank, trading at ₹1,651 (as of 13 October 2024), presents a 15.3% upside with a target price of ₹1,950, based on our blended analysis model. The bank's Net Interest Income (NII) is projected to grow from ₹129,510 crore in FY24 to ₹190,994 crore in FY26, reflecting a 14.6% CAGR, while net profit is expected to rise from ₹64,062 crore in FY24 to ₹84,133 crore in FY26, at a 10.9% CAGR​. Net Interest Margin (NIM) currently stands at 3.5% and is expected to improve as HDFC Bank replaces high-cost borrowings with lower-cost deposits​. The loan book is set to grow at a 10% CAGR over FY24-FY26, driven by higher-yielding retail and rural segments. HDFC Bank’s capital adequacy ratio (CAR) of 19.3% and Tier-1 ratio of 17.3% provide a solid foundation for future growth, while the P/BV of 2.2x FY25E and P/E of 15.9x FY25E make it an attractive proposition​. The bank has a return on equity (RoE) of 14.6% and offers a dividend yield of 1.2%, ensuring value for shareholders​. Moreover, gross non-performing assets (GNPA) are well-contained at 1.33%, reflecting the bank’s strong asset quality​. HDFC Bank is poised to benefit from the ongoing shift to higher-margin retail loans, which currently account for 50% of its total loan book, further improving profitability. With a loan-to-deposit ratio of 103.5% and a 52-week high of ₹1,792, the bank is well-positioned for sustainable growth​. Factoring in multiple valuation models, along with the after-tax WACC of 11.0% to 12.4%, our blended analysis points to a long-term target price of ₹1,950 (15.3%).