Emkay Global Financial has given Buy recommendation for HDFC Bank with a target price of Rs. 2050 in its research report issued on Apr 05, 2022
Emkay Global Financial’s report on HDFC Bank
HDFCB has announced the long-awaited reverse merger of parent HDFCL. The merger should fulfill the implicit RBI policy of 1) not allowing a bank to be owned by an NBFC/HFC, and 2) having its lending business housed mainly in the bank. It should also generate cost/business synergies in the medium-to-long run. Following are the key takeaways from the call and our view: Driving economies of scale and making housing business much more competitive: After the merger, HDFCB’s loan book will cross Rs18tn (USD240bn) and it will become the 8 th largest bank globally by market cap (Rs12.3trn/USD164bn). As per management, nearly 70% of HDFCB’s 68mn customers do not have housing loans, and thus the merger will provide an opportunity to cross-sell mortgage loans, while HDFCL’s customers will be offered banking products. HDFCB’s cost advantage will make the housing loan business much more competitive amid the rising dominance of banks in the segment. For HDFCB, a higher share of the mortgage business (33%) could be gross margin dilutive, but risk-adjusted margins will still be healthy and also increase the tenor of the loan book.
We retain our long-term Buy rating on HDFCB given its strong capital comfort, better return ratios vs. peers and reasonable valuations.
At 15:34 hrs HDFC Bank was quoting at Rs 1,605.00, down Rs 51.45, or 3.11 percent.
It has touched an intraday high of Rs 1,671.00 and an intraday low of Rs 1,602.00.
It was trading with volumes of 409,698 shares, compared to its thirty day average of 475,134 shares, a decrease of -13.77 percent.
In the previous trading session, the share closed up 9.97 percent or Rs 150.15 at Rs 1,656.45.
The share touched its 52-week high Rs 1,724.30 and 52-week low Rs 1,292.00 on 18 October, 2021 and 08 March, 2022, respectively.
Currently, it is trading 6.92 percent below its 52-week high and 24.23 percent above its 52-week low.
Market capitalisation stands at Rs 890,059.33 crore.