The brokerage house says there is hard to find any flaw in the business model of HDFC Bank as it has above-average industry growth rate with stable margins and asset quality. It has put a 12-month price target of Rs 800 with 'outperform' rating.
Macquarie says HDFC Bank has shown impressive growth rate in segments such as commercial vehicles, gold loans, personal loans and credit cards. The bank has open 800 branches in the last 18 months, out of this nearly 70 per cent were in semi-urban and rural areas which are yet to break even.
The typical break-even period is 24 months, thus the cost-to-income ratio is expected to improve further. The brokerage house has increased fiscal year 2013 to 2015 earnings estimate by 5 to 6 per cent on the back of expected higher margins and lower credit costs.
Macquarie has upgraded Axis Bank to 'outperform' from 'neutral' with a price target of Rs 1625. The brokerage house says the stock is poised for a re-rating with the government's recent reform initiatives as the sector's asset quality has bottomed out.
Axis Bank has largest exposure to the SME sector amongst private banks. The brokerage says the sector should see a cyclical reversal in SME asset quality stress and expects slippage ratio to come down to 120 bps for the next 2 years compared to 150 bps expected for fiscal year 2013.
Macquarie has increase Axis Bank's fiscal year 2014 and 2015 earnings estimate by 15% and 11%, respectively, on account of lower credit costs and higher margins.
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