HDFC Bank Target Price Set at ₹1175 by Motilal Oswal

Introduction

Brokerage firm Motilal Oswal has maintained its 'BUY' rating on HDFC Bank, setting a target price of ₹1,175 per share. The recommendation, detailed in a research report dated January 18, 2026, follows the bank's resilient financial performance in the third quarter of fiscal year 2026. Despite facing regulatory headwinds, the bank demonstrated steady growth, reinforcing the brokerage's confidence in its long-term prospects.

Q3 FY26 Performance Analysis

HDFC Bank reported a net profit of ₹186.54 billion for the quarter ending December 2025, marking an 11% year-on-year increase. This growth was largely in line with market expectations. The bank's Net Interest Income (NII) grew by 6.4% year-on-year to reach ₹326.20 billion. A notable improvement was seen in the Net Interest Margin (NIM) on total assets, which expanded by 8 basis points sequentially to 3.35%, indicating better profitability from its core lending operations.

Key Operational Highlights

The bank's other income streams provided significant support during the quarter, growing 16% YoY to ₹132.50 billion. A major contributor to this was the treasury department, which recorded gains of ₹9.30 billion, a substantial jump from the ₹0.70 billion reported in the same quarter of the previous year. This strong performance from treasury operations helped cushion the impact of operational challenges, including a one-time charge of ₹8.00 billion related to the implementation of a new labor code. This charge reflects the costs associated with adapting to evolving regulatory frameworks in the country.

Asset Quality and Provisioning

A key positive from the quarterly results was the bank's management of asset quality. Provision expenses for the quarter stood at ₹28.40 billion, which was 20% lower than Motilal Oswal's estimates. This reduction was primarily driven by the release of ₹10.40 billion in contingent provisions that had been set aside for a large borrower group. The release suggests an improvement in the credit profile of the concerned account and reflects the bank's proactive risk management practices. Lower provisioning directly contributes to higher net profits and signals confidence in the quality of its loan portfolio.

Brokerage Outlook and Projections

Based on the Q3 performance, Motilal Oswal has fine-tuned its earnings estimates for HDFC Bank. The brokerage projects that the bank will deliver a Return on Assets (RoA) of 1.9% and a Return on Equity (RoE) of 14.5% by fiscal year 2027. These metrics are key indicators of a bank's profitability and efficiency in using its assets and equity to generate earnings. The target price of ₹1,175 is derived from a valuation of 2.5 times the bank's estimated September 2027 Adjusted Book Value (ABV), with an additional ₹137 per share attributed to the value of its subsidiaries.

Market Context and Institutional Activity

The analyst recommendation comes at a time of significant institutional activity in HDFC Bank's stock. Recently, the National Stock Exchange (NSE) witnessed a large block trade involving 501,260 shares at ₹927.70 per share, for a total value of ₹465.00 million. Such large trades are typically undertaken by institutional investors and indicate sustained interest in the stock. While the bank's stock has seen volatility, with a one-year return of -7.84%, the long-term five-year return remains positive at 7.07%, underscoring its position as a core holding for many large portfolios.

Conclusion

Motilal Oswal's reiterated 'BUY' rating on HDFC Bank is anchored in the institution's solid Q3 FY26 performance, characterized by steady profit growth, margin improvement, and prudent risk management. The bank's ability to navigate regulatory changes while maintaining its growth trajectory provides a strong basis for the positive outlook. Investors will be watching closely to see if the bank can achieve the projected RoA and RoE targets as it continues to build on its operational strengths.