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JP Morgan Overweight on HDFC

May 8, 2007

HDFC Ltd 4Q beat JP Morgan [JPM] estimates; Profit was 7% higher, mainly from better fee growth and a lower cost-to-income ratio. JPM raised May08 price target is Rs1,824, which implies 9% upside from the current price. JPM retained OW rating given firm business dynamics and defensive nature of the stock.

Subsidiaries add 30% to sum of parts: 56% of subs value from HDFC Bank, 31% from the life company, and 10% from the mutual fund. Stock catalysts are likely to be continued market share increases at the expense of competitors, as well as value unlocking in ICICI’s insurance holding company.

HDFC is expected to report an EPS of Rs 74 and Rs 90 for FY08 and FY09.

DalalStreet. Biz recommend a Blind BUY on this stock whenever their is a market correction. You can expect 25-30% returns YoY.

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