Buy This Large Cap Banking Stock, Shares Can Surge 29% Return, Says IDBI Capital

HDFC Bank reported strong growth in Q2FY23 in terms of overall business momentum. Leading brokerage firm IDBI Capital places a "buy" call on HDFC Bank for a potential upside of 29% with a target price of Rs 1,860 per share. HDFC Bank is India's one of largest private sector banks having a market capitalization of Rs 80,01,994 crore. In the largest corporate merger, HDFC Limited will be acquired by India's largest private sector bank.

Stock Outlook & Return

HDFC Bank stock's Current Market Price (CMP) stood at Rs 1,443.85 per share on NSE. The stock hit the 52 week low level at Rs 1,271.60 and the 52 week high level at Rs 1,725, respectively.

It has given 3.08% return in one week, whereas, in the past one month it fell 3.28%. Over the past one year, the stock fell 13.56%. In the past three years, it has given 17.48% positive return and 54.55% in the past five years. 

 

Credit growth improvement continues

HDFC Bank reported improvement in credit growth to 23.4% YoY vs 21.6% YoY. Corporate and Wholesale book grew by 27% YoY, Commercial book grew by 31% YoY and retail book grew by 20% YoY. Also, Deposits growth remains improved at 19% YoY: CASA deposits grew by 15% resulted CASA ratio at 45.4% vs 45.8% QoQ. 

Asset quality remains stable; NIMs improved

Asset quality stable with GNPA at 1.23% vs 1.28% QoQ due to lower slippages. NIMs improved by 10bpsQoQ; further re-pricing of loans should reflect in next 2 quarters. 

Outlook

"We need to watch for merger impact on the HDFC bank's regulatory requirements if RBI does not allow dispensation. However, banks focus on liability and PSL requirements could get through. We remain structurally positive on HDFC Bank given its superior credit underwriting, structurally better NIM and the ability to maintain higher RoA among its peers," the brokerage has said.

Robust credit growth; Stable asset quality, Buy for Rs 1,860

HDFC Bank's asset quality remains stable as GNPA stood at 1.23% vs 1.28% QoQ led by lower slippages. Annualized slippage ratio declined to 1.5% vs 2.0% QoQ. Credit growth remain robust at 23.4% YoY vs 21.6% (Q1FY23) led by corporate and commercial banking segments. Restructured assets declined to 0.5% of advances vs 0.8% (QoQ) led by recoveries and write offs. Deposits growth remains strong at 19% YoY. NII grew by 8% QoQ led by improvement in NIMs. PPoP grew by 13% QoQ backed by 19% QoQ growth in other income; fee income grew by 8% QoQ. Provisions remain flat (up 1.6% QoQ) resulted into credit cost at 0.9% vs 0.9% in Q1 FY23. Thus, PAT grew by 15% QoQ. "We maintain BUY rating with the target price of Rs.1,860 based on P/BV of 3.2x FY24. Need to watch out for dispensation on regulatory requirements," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. 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 making any investment decision.