Sunday, August 28, 2011

HDFC Bank - Buy on correction



It is the country's most premium bank in terms of valuations. Its strong financial and robust business model justifies the valuation. It is the most consistent performer in the sector in terms of profit growth and credit offtake. Its margin has stayed above 4%, which is one of the highest in the industry along with the lowest ratio of bad loans. So, despite a P/E multiple of 25, it is a safe bet for long-term investors.


One of the strongest banks the scrip has given minimal returns to the investors in the last one year as shown in the table given below.


Time Span Price Change %Change
Today 438.70 -6.10 -1.37
Week 461.95 -17.15 -3.71
Month 501.85 -57.05 -11.36
Three Months 459.63 -14.83 -3.22
Six Months 409.27 35.53 8.68
One Year 435.36 9.44 2.16


Our Recommendation :


The banking sector is likely to under perform in the short term. The scrip can go below Rs.400 giving an excellent investment opportunity for long term investors. Buy for a target price of Rs.600 for a holding period of 1 year.



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