Are HDFC Bank shares cheaper than ICICI Bank's? Worth buying after Q4 results?

Synopsis : Analysts evaluate HDFC Bank's performance and valuation compared to ICICI Bank, emphasizing quarterly earnings consistency.

Nuvama recommended a target price of Rs 1,760 for HDFC Bank stock. While it acknowledges the long-term franchise value, Nuvama believes that short-term price movement will be influenced by the consistency of quarterly earnings.

In contrast to the previous two quarters, which saw various negative outcomes on earnings or the balance sheet, analysts observed that HDFC Bank's performance in the March quarter was largely satisfactory across most metrics. They consider the stock valuations to be favorable.

According to Antique Stock Broking, the core performance slightly exceeded estimates. However, due to potential pressure on net interest margin (NIM) in the near term, it reduced its FY25 earnings estimates by 2.5 percent. Nonetheless, the brokerage largely maintained its FY26 earnings estimates. It maintains a 'Buy' rating on HDFC Bank with a target price of Rs 1,850.

Kotak Institutional Equities expressed a preference for cautiousness rather than extrapolating from the March quarter's results. It highlighted the potential complexity in achieving normalization across various metrics.

"We anticipate quarters where expectations may outpace execution, particularly regarding two crucial variables: deposits and NIM progression," the firm stated.

Despite this caution, Kotak maintained a 'Buy' rating with a fair value of Rs 1,750, citing the stock's attractiveness at current levels. It believes the medium-term business outlook is highly favorable, with a projected annual compounded growth of 15 percent.

Nirmal Bang conveyed a positive long-term perspective on HDFC Bank, emphasizing its strong growth potential, robust capital position, anticipated merger synergies, and outstanding asset quality. While acknowledging business growth and NIMs as near-term focal points, it proposed a target price of Rs 2,026.

Nuvama recommended a target price of Rs 1,760, acknowledging HDFC Bank's long-term franchise value but highlighting that short-term price performance hinges on consistent quarterly earnings. It anticipates ongoing volatility in quarterly earnings.

Regarding the comparison between HDFC Bank and ICICI Bank, Kotak stated, "Relative to ICICI Bank, the risk-reward ratio remains unconvincing even though HDFC Bank trades at a discount. We would prefer a wider discount, as the current relative valuation doesn't offer room for execution setbacks, which would not be favorable.