HDFC Bank stock: Brokerages stay bullish despite target price cuts after Q2 results; Bernstein sees 58% upside
HDFC Bank Q2 FY27 Results Analysis: HDFC Bank stock remains a bullish bet for major brokerages despite target price cuts following Q2 results. JPMorgan and Citi lowered their targets, while Bernstein sees nearly 58 percent upside, even as margin pressure and weak earnings growth persist.
HDFC Bank stock remains a favoured pick among several major brokerages despite concerns over weak earnings growth and pressure on net interest margins following its Q2 FY27 results. JPMorgan and Citi have cut their target prices while retaining bullish ratings, whereas Bernstein sees a potential upside of nearly 58 percent from Friday's closing price. The contrasting assessments follow HDFC Bank's July-September quarter earnings, which broadly met market expectations.
The private sector lender reported a 4.7 percent year-on-year increase in standalone net profit to Rs 19,510 crore, while net interest income (NII) grew 9.7 percent to Rs 34,619 crore. A CNBC TV18 poll had estimated net profit of Rs 19,567 crore and NII of Rs 34,861 crore. The bank's gross non-performing asset (GNPA) ratio improved to 1.11 percent from 1.17 percent in the preceding quarter, while gross advances grew 16.3 percent year-on-year.
However, margin pressure, modest profitability growth and questions over the sustainability of loan expansion have prompted brokerages to adopt differing views on the bank's earnings outlook. Bernstein maintained its 'Outperform' rating with a target price of Rs 1,150, implying an upside of approximately 58 percent from Friday's close. The brokerage said HDFC Bank's weak earnings growth continued, with return on assets moderating to 1.8 percent despite cost discipline.
However, NII growth remained healthy despite margin pressure, while asset quality stayed resilient. JPMorgan maintained its 'Overweight' rating but reduced its target price to Rs 970 from Rs 990, implying approximately 33 percent upside. The brokerage described Q2 as steady, with earnings broadly meeting expectations. Reported NIM declined 10 basis points sequentially to 3.30 percent, partly due to FCNR deposits.
JPMorgan expects a neutral-to-positive margin outlook but flagged reduced balance-sheet flexibility as the liquidity coverage ratio fell to 113 percent. Citi retained its 'Buy' rating but cut its target price to Rs 880 from Rs 970, suggesting nearly 21 percent upside. The brokerage highlighted margin compression, slower growth relative to the banking system and constrained liquidity buffers. However, fee income supported operating profitability, while asset quality remained resilient.
Citi also flagged execution risks amid the leadership transition. Jefferies maintained its 'Buy' rating with a target price of Rs 880, implying approximately 21 percent upside. The brokerage said core margins held up better than expected, while asset reallocation, stronger retail deposits and higher-yielding loans could support profitability. It also highlighted strong asset quality but cautioned about potential management changes.
Nomura maintained its 'Buy' rating with a target price of Rs 940, implying nearly 29 percent upside. The brokerage said lower liquidity coverage could constrain loan growth, making deposit mobilisation crucial. FCNR(B) inflows contributed around three percentage points to sequential deposit growth, while core pre-provision operating profit rose 12 percent year-on-year to Rs 28,700 crore, broadly meeting estimates.
Goldman Sachs maintained its 'Buy' rating with a target price of Rs 861, suggesting approximately 18 percent upside. The brokerage noted that NIM declined eight basis points sequentially, more than expected. However, core revenue growth accelerated to 10 percent from 7 percent in Q1, while core pre-provision operating profit growth improved to 13 percent from 8 percent, beating estimates by 2 percent.
