HDFC Bank To Gravita India - Here Are The Top Stock Picks For December 2024 By Axis Securities

Axis Securities Report

HDFC Bank – Embracing The Upturn

Current market price - 1,796 / Target Price / Rs 2,025 / Upside 13%

HDFC Bank Ltd.'s management has clearly highlighted its focus on reducing its loan-deposit ratio to pre-merger levels adopting an accelerated approach, resulting in a significantly slower credit growth versus deposit growth.

HDFC Bank does not intend to disturb the deposit growth momentum that has picked up in the current quarter.

We expect HDFC Bank to deliver RoA/RoE of 1.8-1.9%/14-16% over FY25-27E, supported by gradually improving cost ratios and steady credit costs.

Key risks:

1. Slowdown in overall credit momentum owing to the bank’s inability to ensure deposit mobilization,

2. Slower substitution of highercost debt with lower-cost deposits.

Cholamandalam – Strong Growth Across Key Parameters

Current market price- 1,234 / Target Price Rs 1,675 / Upside 36%

Cholamandalam Investment and Finance Company Ltd. continues to eye pre-tax RoTA of 3.5% over the medium term, while FY25 RoTA could range between ~3.2- 3.3%. We expect Cholamandalam to deliver RoA/RoE of 2.3-2.5%/20-23% over FY25-27E.

We recommend a Buy on the stock with a target price of Rs 1,675/share.

Key risks:

1. Moderation in growth momentum,

2. Inability to scale up new products and

3. Asset quality concerns cropping out.

Gravita India – Capitalising On the Recycling Revolution

Current market price - Rs 2,177 / Target Price Rs 3,000 / Upside 38%

Gravita India is well positioned to capitalize on the industry growth and continues to focus on increasing the share of value-added products, which generate higher margins. The company has consistently increased its recycling capacity and plans to expand it further including in new areas of recycling.

We expect Gravita to deliver strong performance supported by-

1. Its dominant share in a growing market,

2. Steady improvement in profitability,

3. Regulatory tailwinds, and

4. Expanding offerings.

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