Buy HDFC Bank; target of Rs 1870: YES Securities

YES Securities is bullish on HDFC Bank has recommended buy rating on the stock with a target price of Rs 1870 in its research report dated January 16, 2021.

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YES Securities’ research report on HDFC Bank

We are revising FY21/22/23 earnings estimates by 10%/3%/4% respectively and ABV estimates by 1.5?2% for these years, after having upgraded these numbers even towards the end of November in our collection feedback report. Earnings revisions thus could be sharper for the consensus. The stand?alone bank trades at 2.8x P/ABV and 16x P/E on FY23 estimates, adjusted for the valuation of its holdings in HDB Financial and HDFC Securities. Valuation is palatable and can move higher as it stands just above the long?term mean on 1?yr rolling fwd. basis and the probability of 20% earnings CAGR over FY20?23 has improved substantially. Also, the bank trades at significant discount to KMB despite better growth delivery.

Outlook

Upgrading earnings estimates again, now building 20% CAGR over FY20? 23 ? Valuation will get a lift; upgrade 12m TP to Rs1,870.

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