The brokerage firm HDFC Securities has given an eye on the banking space and has picked up Axis Bank for a target price of Rs 1,021, Bandhan Bank for a target price of Rs 406, City Union Bank for a target price of Rs 213, Federal Bank for a target price of Rs 126, ICICI Bank for a target price of Rs 1,001 as its top picks with a buy rating. Whereas, Cholamandalam Investment and Fin Co (CIFC) for a target price of Rs 774, CreditAccess Gr for a target price of Rs 994, and SBI Card with a target price of Rs 1,255 are the brokerage's top selections in the NBFC and HFC sector, with a buy rating ahead of Q4FY22E results.
The brokerage has said "We expect the HSIE coverage universe of 23 lenders to report yet another optically strong quarter, with earnings growth at +65% YoY (+11% QoQ), as provisioning run rate continues to normalise (130bps). Collections and recoveries have continued to be strong, with little incremental stress expected on account of the third wave."
According to the brokerage "With asset quality issues largely over, we believe that management commentary on loan growth outlook amidst rising inflation would be a key monitorable, although we expect our coverage universe to continue gaining market share (+100bps for banks during Q4FY22). We tweak our FY22E-FY24E forecasts for select lenders to factor in stronger loan growth and lower credit costs and roll forward to Mar-24."
HDFC Securities has claimed "We continue to prefer large banks with strong balance sheets and formidable deposit franchises - ICICIBC (TP INR1,001) is our conviction pick among large banks. Given the steep 14% and 37% run-up respectively in CIFC and CREDAG since our last publication, we move SBICARD (TP INR1,255) to the top of our NBFC conviction list."
HDFC Securities has also highlighted that "We continue to prefer large banks with strong balance sheets and formidable deposit franchises that are likely to continue to gain market share on both sides of the balance sheet with ICICIBC (TP INR1,001) being our top pick. Among NBFCs, SBICARD (TP INR1,255) is our top pick, with strong visibility of growth and profitability as we believe the concerns on MDR are overdone."
|Banks||Recommendation||Target Price in Rs|
|AU Small Finance Bank||REDUCE||1,264|
|City Union Bank||BUY||213|
|Kotak Mahindra Bank||REDUCE||2,155|
|Karur Vysya Bank||ADD||58|
|Ujjivan Small Finance Bank||REDUCE||21|
|NBFCs and HFCs||Recommendation||Target Price in Rs|
|Cholamandalam Investment and Fin Co Ltd||BUY||774|
|CreditAccess Grameen Ltd||BUY||994|
|IndoStar Capital Finance Ltd||REDUCE||229|
|LIC Housing Finance Limited||REDUCE||409|
|Mahindra & Mahindra Financial Services Ltd||ADD||207|
|Repco Home Finance Ltd||ADD||290|
|Shriram Transport Finance Co Ltd||ADD||1,641|
|Ujjivan Financial Services Ltd||ADD||201|
|Source: hdfcsec.com. Data as of 14 April 2022|