- CLSA sees 20 percent upside from Thursday's closing price
- Anticipating 20% compound annual growth rate in profit
Brokerage house CLSA raised its target price on HDFC Bank, the country's most valued lender, anticipating compound annual growth rate of 20 percent in profit.
While reiterating its ‘Buy' rating on the stock, CLSA revised its target price to Rs 2,000 from earlier Rs 1,830. This represents a potential upside of 20 percent from Thursday's closing price.
HDFC Bank's investments into artificial intelligence, automation and branch digitisation should help productivity and raise customer satisfaction, the report said.
These benefits (from investments) are visible with: 1) share of digital transactions rising 80 percent, 2) staff base falling 11 percent over the second half of financial year 2016-17 and 3) higher growth in lending over digital platforms.CLSA Report
Also Read: RBL Bank More Expensive Than IndusInd Bank And HDFC Bank, Says Ambit
Other Key Positives
- Uptick in retail risk bearing
- ESOP grants were late and cut by 60 percent with selective grants. This may reduce impact on profit under Ind AS, but pay hikes may need raising
- Subsidiaries scaling up and aiding profits
Retail growth remains to be an area to watch after the segment was hit by demonetisation in the second half of the last financial year, CLSA said. Growth in debit cards, key to CASA growth, also dipped to as low as 2 percent in FY17, the report said.
While agri loans are growing, CLSA said, NPLs are also rising and may see some pressure due to farm loan waivers.
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