Most analysts said HDFC Bank’s valuations were cheaper compared to historical averages but concerns over profitability and growth could delay re-rating.
“While we appreciate the strength of the franchise, its relatively lower medium-term RoA (Return on Asset) profile vs peers makes outperformance difficult,” said Nomura in a note to clients.
- Stock valuation of estimated Price to Book Value at 2.1 times appears attractive.
- Key re-rating catalysts are strong deposit growth and margin improvement.
- Comfortable retaining positive thesis; worst of merger-related news over and growth may resume with fewer concerns.
- Margins may have bottomed out; margin progression key focus area in the medium term.
- Bank facing tough deliverables, with few low hanging fruit to pluck.
- Could trade at lower valuations than ICICI due to performance gap; risk reward ratio however favourable.
- Estimated valuations of adjusted Price to Book at 2.2 times reasonable.
- Bring the world’s 7th largest bank, it looks attractive for global portfolios as well.
Download The Economic Times News App to get Daily Market Updates & Live Business News.