A company is said to be ‘fundamentally strong’ after it portrays a certain set of characteristics including strong and consistent financials, lower leverage ratios, and many more.
Listed below is one such blue-chip stock with a ‘fundamentally strong’ nature that one should add to their watchlist for a potential upside of up to 43 percent:
HDFC Bank Limited
With a market capitalization of Rs 11.01 lakh crores, the stocks of HDFC Bank Limited opened at Rs 1,393.65 in the trading session that took place on Wednesday, fell by 2.3 percent as compared to the previous closing levels of Rs 1,427.60 apiece.
Recently, the private-sector bank announced its Q3FY24 results with positive movements as far as the total income and after-tax profit numbers are concerned. The former rose from Rs 1.08 lakh crores during Q2FY23-24 to Rs 1.15 lakh crores during Q3FY23-24, and the latter, keeping the timeframe the same, rose from Rs 17,312 crores to Rs 17,718 crores.
Coming onto some bank-specific ratios, there was a trim in the non-performing assets (NPAs) with the gross NPA numbers reducing from Rs 31,577 crores during Q2FY23-24 to Rs 31,011 crores during Q3FY23-24 and the net NPA numbers taking a downshift from Rs 8,072 crores to Rs 7,664 crores during the same period.
In addition, the bank, historically, has kept the return ratios during FY22-23, viz, the return on equity (RoE) as well as the return on capital employed (RoCE), intact with the former reported at a decent 15.89 percent and the latter at 3.10 percent.
Despite an uptick in the bottom-line numbers, the investors appeared unimpressed concerning the outlook on the bank’s loan growth, loan-to-deposits ratio (LDR), and margins. Net interest income (NII) was reported at Rs 28,471.34 crores trailing analyst estimates of around Rs 29,000 crores.
During the last week, the shares of HDFC Bank Limited, even though after putting through a good Q3 performance, faced slippages in prices after the American Depository Receipts (ADRs) of the bank witnessed a deep fall, dipping close to 15 percent in two consecutive days.
Having a positive outlook for the bank’s future operations, Prabhudas Lilladher, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation on the stocks of HDFC Bank Limited with a target price of Rs 2,000 indicating a potential upside of approximately 43 percent.
The rationale for providing such a recommendation pertains to the decent growth in total advances, growth in commercial & rural banking, retail growth, and many other parameters.
Written by Amit Madnani
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