HDFC Bank stock call: Buy, as UBS sees margin, asset quality improving, market share rising

Brokerage firm UBS has assigned a ‘buy’ rating to the HDFC Bank stock with a target price of Rs 1,900 per share, citing improvement in asset quality and margins and gains in market share. The target price of Rs 1,900 implies an upside of 33 percent from the last closing price of Rs 1,430.

The UBS note comes two days after HDFC Group, which includes HDFC Life, HDFC AMC and HDFC Ergo, received the RBI approval to acquire up to 9.5 percent stake each in six banks – IndusInd Bank, Yes Bank, Axis Bank, ICICI Bank, Suryoday Small Finance Bank and Bandhan Bank.

Follow our market blog for live updates

According to the brokerage, HDFC Bank kept up high focus on asset quality, business profitability and market share with branch expansion to continue at 10-20 percent on a rolling 12-month basis.

The growth in core profitable business is also likely to remain faster than the industry. According to the UBS analysts, any improvement in the system liquidity will accelerate the margin improvement process. “The company is not targeting any loan growth number in the near term but is planning to gain market share over the medium term,” the report added.

Also read: RBI Policy Rate: Markets eye monetary policy for rate cut cues even as repo rate likely to remain unchanged

Analysts and investors in banking stocks like HDFC Bank will also keep a close watch on the RBI Monetary Policy Committee (MPC) meeting today for any announcements on addressing the liquidity challenge. Over the last five sessions, the HDFC Bank stock has fallen around 2 percent. The stock has lost around 6 percent since its fiscal third quarter results released on January 17.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.