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Buy This Large-Cap Banking Stock For 45% Upside, Stock Recently Hit 52-Week Low

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In a recent research report on IHDFC Bank, a large-cap private sector bank, released by ICICI Securities, the brokerage suggested investors buy the company's shares at a target price of Rs. 1,955 per share. The CEO of HDFC Bank, Mr Sashidhar Jagdishan's message is similar to what was articulated during the analyst day on 31st May'22 highlighting why this is an opportune time to fructify the merger given housing loan growth opportunity with deeper penetration, regulatory convergence, conducive market development, pricing convergence, portfolio rebalancing, enhanced cross-sell, etc.

 

CMP, Target Price, 52 Week Low & High, Potential Gains

CMP, Target Price, 52 Week Low & High, Potential Gains

The current market price (CMP) of HDFC Bank Ltd's share is Rs 1,353.80 per share, after gaining 1.49%. The stock's 52-week low was recorded in June 2022 at Rs 1,271.60/share. While the 52-week high was recorded on 18 October 2021 at Rs 1,725 per share. The stock hit the 52-week low last week, and currently, its CMP is Rs 82.2 per share below its 52-week low.

According to the CMP and the estimated Target price set by the brokerage, the stock sees a potential jump in its price by 45% in 12 months.

The data shows the stock has performed well in the last 1 month and gained nearly 2.64% and 4.97% in the last 1 week. Whereas in 3 months and 1 year, it gave a negative return of 6.16% and 10.12%, respectively. Lon long-term investment, the returns are good compared to short-term investment returns. In 3 years it gave 11.98% returns and in 5 years, it gave 61.3% returns.

Stock Details 
CMPRs 1353.80
Target PriceRs 1,955
52 Week LowRs 1,271.60
52 Week HighRs 1,725
Potential Returns60.00%
1 Year Returns-10.12%
5 Year Returns61.30%
Business Updates
 

Business Updates

  • Segmental result analysis reflects 13% YoY decline in earnings from retail segment (over and above 18% decline in FY21). Bank's (pretax) earnings growth of 17% was buoyed by wholesale segment where earnings were up 44% in FY22 (over and above 23% growth in FY21). Treasury profits were stable at Rs 90bn.
  • Priority sector lending: Bank has bought Rs 1trn of PSL certificates (PSLC) in FY22 (vs Rs 843bn in FY22) with incremental certificates skewed more towards the micro-enterprise and general category. Besides, deposits with NABARD/SIDBI/NHB for PSL shortfall have spiked to Rs 447bn (vs Rs93bn in FY22). Of the overall advances, priority sector advances stood at Rs 3.9trn (30% of domestic advances).
  • Attrition rate was relatively higher in FY22 at 25% - 36k employees (vs 18.3k in FY21). It was more pronounced in frontline staff/sales officers (43%) and nonsupervisory staff (22%) and in
  • FY22 slippages of Rs 268.6bn (2.3% run-rate) were offset by better recoveries / upgrades and write-offs of Rs94.3bn. GNPAs down to 1.17% (vs 1.32% in FY21).
  • Restructured portfolio - of the gross restructured pool of Rs 159bn as of September 2021 under covid resolution framework, in H2FY22, 13% slipped into NPAs, 4% was written-off and 3% was repaid. Besides, Rs68.7bn was restructured under MSME guidelines taking cumulative net restructured pool to 1.5% of advances. HDB Financials gross restructured pool was
  • Provision for reward points in FY22 was managed well (despite higher spends post covid) at Rs4.65bn (vs Rs 3.75bn in FY21).
  • Compared to working capital and short-term financing, proportion of term lending inched up a percentage point to 66.2%.
Annual report states

Annual report states

  1. Growth runway is huge; potentially add HDFC Bank every five years. Proposed merger adds an entirely different dimension to the future.
  2. There may not be any need to raise further funds to meet reserve requirements.
  3. Plans to nearly double its network in next 3-5 years by opening 1,500 to 2,000 branches every year.
  4. Bank will continue to invest in modern technology and talent.
Valuation

Valuation

HDFC bank's annual report was themed on 'Leading Responsibly', focussing on reimagining the future with technology and a service-first culture. Given the progress made on technology investments, processes and governance, the regulatory actions have been fully lifted. HDFCB has converted the challenge into an opportunity and has made substantial strides in the way it evaluates, manages and operationalises technology. ICICI Securities maintains a 'BUY' rating with an estimated target price of Rs 1,955 per share.

About - HDFC Bank Ltd

About - HDFC Bank Ltd

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive 'in-principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. HDFC Bank is a publicly held banking company, the bank was incorporated in August 1994 under the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. It is engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations. It is promoted by HDFC Ltd. Currently, HDFC Bank Ltd. is the largest private sector bank in India.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

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