Buy HDFC Bank; target of Rs 1300: Emkay Global Financial

Emkay Global Financial's report on HDFC Bank

HDFCB has built a strong retail-cum-corporate bank with market share gain across businesses, which the designate MD intends to strengthen by focusing on techno-banking, capturing B2B/B2C ecosystem and gaining market share at a pace faster than the past. The retail business is now at 80% of the pre-Covid level and should benefit from its strong rurban presence with agri doing well. The bank has a high share of the corporate book built around working capital and >AA corporates, where the deal pipeline is also building up well. The bank is well-capitalized, courtesy of higher internal returns v/s RWA growth. Retail collection efficiency is ~80-90% across products. The bank believes that NPAs may not cross the peak seen post-GFC at 2% (2010). Reducing cost ratios and better operating level should continue to support superior RoAs of 1.8-2%.

Outlook

We retain Buy/OW stance in EAP with a TP of Rs1,300 (based on 2.8x core bank Sep P/ABV + Subs value of Rs53), given its strong stress management capability and superior return ratios. Amid a spate of recent management churn and events, new top management will have an uphill task maintaining its historic management premium.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More