HDFC Bank | HDFC Bank Share Price: HDFC Bank may get a good rerating in 3-4 years; Kotak Bank to remain within range: Rahul Malani

Rahul MalaniBanking Analyst, Sharekhan, says if one has a investment horizon about three years, so this is a good entry point for HDFC Bank from a medium-term perspective. In the short term it will continue to be guided by news flows and quarterly figures. Malani doesn’t see more than a 10-15% upside in the next one or two years. But within three or four years, there is a scenario for a good requalification. For Kotak Mahindra Bankthe Street seeks a schedule for the lifting of the RBI embargo on issuing credit cards and bringing more customers online through and also the overall submissions to the RBI were not clear. Therefore, until that clarity hits the streets, Kotak Bank will continue to be range-bound and trading with a negative bias.

Let’s start with Kotak because it is an absolute disappointment. Do you think that influences the price much, given that the stock has been languishing for quite some time?
Rahul Malani: As you have alluded to, the assessment mainly reflects all the intermittent obstacles. Therefore, we don’t think there was a very negative reaction in the stock because the results were weak, but that was in line with expectations. However, The Street was looking at the timelines for lifting the RBI embargo, apart from general submissions to the RBI that were unclear. So until that clarity hits the streets, Kotak Bank will continue to be range-bound and trade with a negative bias.What is the outlook as far as HDFC Bank is concerned? In general, most brokerages have a Buy, Hold, or Outperform rating. How do you see the overall balance sheet repair? Because that seems to be a little worrying and CASA Growth Is it going to be key to HDFC Bank’s profitability?
Rahul Malani: For HDFC Bank in this quarter, from management feedback, we came to determine that there is now better visibility going forward because management shared the growth path for the next three years. Basically we believe that it is a good time if we take an investment horizon of around three years. It will be a good bet over the next three years because FY25 and FY26 will be a transition period and furthermore FY27 will normalize where the growth trajectory will return to or around pre-merger level.

Therefore, we will start to see a progression in NIMs increasing by at least 10-20 basis points. Therefore, most of the balance sheet repair would have been done by the end of FY26, according to the management comment you alluded to yesterday. We believe their valuations are very attractive considering the three-year investment horizon.

Other intermittent hurdles like the lower CASA ratio have been a sector phenomenon, but if we look at the overall results as well, even though the CASA is weak and even though the net loan growth is weak, they continue to manage the NIMs in a very constant way because a lower CASA is a sectoral phenomenon and once the lower interest rate cycle comes into force, there will be money transfers. Therefore, we should not link this trend from one quarter to the next, but rather it should be viewed from a broader perspective.Do HDFC Bank numbers deserve any rerating or target price change?
Rahul Malani: I have clearly alluded to the fact that if a person has an investment horizon of about three years, then this is a good entry point from a medium-term perspective. In the short term it will continue to be guided by news flows and quarterly figures. In the short term, HDB’s IPO would go public. So, a few more, but no big advantages. I don’t see more than a 10-15% upside in the next one or two years. But over a period of three or four years, there will be a scenario for good rerating going forward.