HDFC Bank seeks a ‘buy with’ price target of Rs 1,860
With the reduction in Covid cases and the start of vaccination, the business is resuming through outbound activities of sales and recoveries.
Mr Sashi Jagdishan (MD-CEO) emphasized that although HDFC Bank has been cautious in the past 1-1.5 months due to Covid and its impact on employees and customers, the decline in infection and vaccination rates supports the bank’s opening. On-site staff- sales and collection, are more willing to assume outbound responsibilities.
On the customer side, the bank is satisfied to a large extent because 85% of retail customers cooperate with companies of AA level and above, which have fewer unemployed people; SMEs are more prepared than in the past and larger corps. have better liquidity on their balance sheets.
We are looking at a profit of 19 CAGR out of FY21-24, maintaining a “buy” rating while maintaining a target price of 1,860 rupees, a bank value of 3.7 times 23E adjusted PB. The ADR target price is $ 91 based on a 22% premium on the exchange rate conversion of the local price target.
HDFC Bank plans to use its digital and distribution advantages in non-urban markets to expand its banking platform for SMEs (which accounts for 20% of loans), where it has become a leading bank. Recent changes in the management structure are aimed at promoting a more focused method of execution, and Rahul Shukla will drive business growth.
HDFC Bank is aware of the asset quality risks associated with this segment and, therefore, will strengthen the work of the underwriting and collection teams.
Although technological disruption is a normal business risk for any bank/financial company, HDFC Bank could have created a system to ensure a faster recovery here. Management pointed out that it continues to work with the Reserve Bank of India to solve problems while building a stronger platform. In terms of fintech, the bank plans to help bridge the scale- from the bank and seamless experience- from fintech platforms.
HDB-FS has a niche position (formerly Covid’s powerful track), and HSL will get more support and open up some monetization. HDB-FS targets a customer base several degrees lower than the bank’s and has performed well before Covid arrived. Mgmt believes that the company does not need to make any structural changes to its business model.
HDFC Securities Ltd (HSL) has benefited from the increased volume of retail transactions and its strong influence. It is expanding its reach and expanding its institutional platform.