Angel Broking views on Banking Stocks Part II - HDFC Bank, Axis Bank, Indian Overseas Bank

HDFC Bank - Target of Rs 1361

Angel Broking has maintained its buy rating on HDFC Bank with a 12-month target price of Rs 1361 in its November 21, 2008 research report. "We believe HDFC Bank is among the most competitive banks in the sector and is poised to maintain its profitable growth over the long term. We believe the bank's competitive advantages, driving gains in CASA market share and traction in multiple fee revenue streams, can support upto 5% higher core sustainable RoEs vis-à-vis sectoral averages over the long term, creating a material margin of safety in our target valuation multiples. At Rs 857, the stock is trading at 13.0x FY2010E EPS of Rs66 and 1.9x FY2010E ABV of Rs 453.6. We value the stock at 3.0x FY2010E ABV to arrive at a 12-month target price of Rs 1361, implying an upside of 59%. We maintain Buy on the stock," says Angel's research report.

IOB, target of Rs 96

Angel Broking has maintained its buy rating on Indian Overseas Bank (IOB) with a 12-month target price of Rs 96 in its November 21, 2008 research report. "Given the bank's progressive decline in NIMs that has eroded sustainable RoEs as well as further downside risks to NIMs and asset quality, we have valued the stock at 0.9x FY2010E ABV below the median one-year forward P/ABV multiple of 1.2x that it has traded at since April 2002. Nonetheless, at Rs 62, the stock is trading at cheap valuiations of 2.6x FY2010E EPS of Rs 24.2 and 0.6x FY2010E ABV of Rs113.2. Hence, we maintain Buy on the stock, with a 12-month Target Price of Rs 96, translating into an upside of 54%," says Angel Broking's research report.

Axis Bank, target of Rs 748

Angel Broking has maintained its buy rating on Axis Bank with a target price of Rs 748 in its November 21, 2008 research report. "Over the past five years, Axis Bank has transformed itself into a strong private bank with a growing market share in Corporate and Retail banking. During this period, the bank has rapidly expanded its network and gained traction in segments such as transaction banking, wealth management and cards. We expect the bank's RoE to improve to 19% by FY2010E and expect the bank to deliver amongst the highest PAT growth in our coverage universe at 38% CAGR over FY2008-10E. We value the stock at 2.4x FY2010E ABV (20% discount to HDFC Bank, given higher asset quality concerns) to arrive at a revised 12-month target price of Rs 748 (Rs 929), implying an upside of 82%. We maintain a Buy on the stock," says Angel's research report.