HDFC Securities, a leading brokerage firm, has initiated a buy coverage for several PSU stocks in which it sees an upside potential of upto 30 percent. In this article, we will look at which stocks the brokerage is bullish on and its rationale.
The Indian PSU banking space, which was once considered to be structurally weak, is beginning to show the early signs of a sustained turnaround, reports HDFC Securities in a note.
The Indian PSU banking space can be expected to recover, owing to governance reforms, better digital infrastructure, and better earnings quality. The brokerage believes that select mid-tier PSU Banks present attractive risk-reward opportunities in light of their clean balance sheets, scalable operations, and potential recapitalisation triggers.
Out of this list, HDFC sees the highest upside in SBI. It set a target price of Rs 1,035 per share, a significant upside of 30 percent from its Tuesday closing price of Rs 795.40.
It cited that SBI’s sector leadership, strong asset quality, robust deposit base, and advanced digital capabilities position it well to manage margin pressures and drive sustainable growth.
On the Bank of Maharashtra, the brokerage set a target price of Rs 70, a significant upside of 28.39 percent from its Tuesday closing price of Rs 54.52. It cited that it is better placed with a good deposit base, very low cost of funds, and better margins than many Peer Banks.
It expects that it will continue to grow rapidly and earn with a 19 percent PPoP CAGR and 14 percent EPS CAGR over FY25-27. Upside from tax normalisation should be offset by provisioning buffers.
On the Bank of Baroda, the brokerage set a target price of Rs 290, a significant upside of 22 percent from its Tuesday closing price of Rs 237.82. It cited that it has a Strong deposit base and asset quality and expects margin pressures and higher opex to pressure earnings; nevertheless, it expects 13 percent PPoP (Pre-Provision Operating Profit) and 10 percent EPS CAGR over FY25–27, plus potential treasury gains to support this.
On the Indian Bank, the brokerage set a target price of Rs 735, a significant upside of 18 percent from its Tuesday closing price of Rs 623.30. It cited that it has reasonably strong profitability, a good deposit base, and improving asset quality.
While growth has lagged, management expects a 10 percent earnings CAGR over FY25–27, and RoA will remain above 1.20 percent, although credit and deposit growth will be key monitorables amid uncertainties across the globe.
On the Union Bank of India, the brokerage set a target price of Rs 160, an upside of 9 percent from its Tuesday closing price of Rs 147.09. It cited that its sub-optimal balance sheet and concentrated loan book.
Despite strong recoveries, elevated slippages persist, leading to an estimated 7 percent EPS CAGR over FY25–27 amid margin pressure and rising credit costs. Nifty PSU Bank Index gave a 5-year return of an impressive 372 percent, and the 1-year return stood at negative 5.50 percent. Further, the 3-month return stood at 10 percent
Written by Satyajeet Mukherjee
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