Buy This Banking Stock For 26% Return, New Acquisition On Board: HDFC Securities

Brokerage firm Motilal Oswal has recently recommended buying the stock of Restaurant Brands Asia (RBA) for a 26% return in the near term. The firm said, "Axis Bank's ability to organically grow the superior customer franchise with new customer acquisitions of similar profile, driving higher spends, etc. would be a key monitorable."

Target Price

The Current Market Price (CMP) of Restaurant Brands Asia is Rs. 750. HDFC Securities has estimated a Target Price for the stock at Rs. 950. The stock is expected to offer a 26% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 750
Target Price	Rs. 950
1 year return	26.00%

Comments by HDFC Securities

Motilal Oswal stated, "Axis Bank announced the acquisition of Citibank's cards, consumer lending, and wealth businesses in a transaction that is likely to be closed over the next 9-12 months. The acquisition cost will be US$1.6bn. Axis Bank will need to up its game in order to create sustainable value from the Citibank portfolio. We believe the key challenge for Axis Bank post the transaction would be the retention of Citi's existing customer base as well as organically adding customers with a similar profile."

Company performance

The bank's NII in FY 21 was recorded at Rs. 292.4bn, which is expected to be at Rs. 333.5bn in FY 22. Their PAT in FY 21 stood at 65.9bn, which is expected to be at 126.3bn in FY 22. The bank's Pre-Provision Operating Profit (PROP) in FY 21 was recorded at Rs. 257.0bn, which is expected to be at Rs. 256.6bn in FY 22. the firm added, "Given the distinct and superior customer profile that gets added through this transaction, we believe that synergies are likely to be back-ended and are conditional on significant frontloading of investments. At CMP, Axis Bank provides a good margin of safety."

About the company

Axis Bank is one of the biggest private banks operating in India. The bank recently has announced the acquisition of the consumer assets of Citibank as well as that of its NBFC subsidiary, Citicorp Finance. The portfolio includes a lucrative 2.6mn credit cards franchise and other loan book of Rs. 185bn (mortgages, PL etc.), the deposit base of Rs. 502bn and wealth management business with AUM > Rs. 1Trn. Citibank's wealth management and Private banking portfolio, along with its lucrative deposit base (1.2mn customers, 81% CASA) are also part of the deal.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.