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Jul 18, 2011 07:52 PM IST | Source: CNBC-TV18

Check out: SBI Cap's views on HDFC Bank, Jet Airways

Sanjay Vaid, senior vice president and co-head of equities, SBI Cap is bullish on HDFC Bank. He sees the stock around Rs 550-560 levels in the shorter term

Sanjay Vaid, senior vice president and co-head of equities, SBI Cap is bullish on HDFC Bank. He sees the stock around Rs 550-560 levels in the shorter term

Jet Airways, he says, may see 10-15% rally in near-term. However, in the long-term, he says, the company is still not out of the woods.

Check out: Tulsian's unlikely heroes for a 6-12 month range

Below is the transcript of his interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: What is your view on HDFC Bank?

A: HDFC Bank is among the top banks in the private sector domain. It has a very strong franchise. That has led to a huge amount of operational efficiencies for the bank over the years. It has got the strongest asset quality, good coverage ratios. The bank has aggressively looked into rural areas and tier-V and tier-VI cities. And that would lead to almost 30% plus compound annual growth rate (CAGR) in revenues for the bank in the next two-three years.

It has positive net interest margins (NIMs) of almost 4.6%. We feel that bank would be able to maintain that for the next two-three years easily. Although the stock is trading at premium to other banks, but given the kind of good asset quality, traction of business, reduced credit cost going forward, I think it can easily trade around 2.5 times the adjusted book value of FY12 which is close to Rs 145. So, we feel easily bank can go to around Rs 550-560 levels in the shorter term, maybe post the results which are being announced tomorrow. For Rs 600, probably one might have to wait for another quarter. I think it is a good investment, one should ride the rally. 

Q: What is your call on Jet Airways?

A: Jet Airways is the market leader in the space. What we have seen in the space or environment is that the amount of competition, which was there earlier maybe a year back, has gone down a little. It is becoming a slightly easier environment in which we can play. The positive for Jet Airways has been that it has been able to lease three aircrafts in the lean season. Then the rulings, which are coming, are all positive and the sale of land in BKC also could be positive.

The only negative could be the inconsistence of profitability which the company has been able to generate in this sector. However, in the last 13 weeks, we have seen huge amount of consolidation happening in this counter. Around Rs 400 to 500 range, a lot of people have moved into it.  

On F&O cues, if you see for Jet Airways, the open interest has been going up with improving cost of carry. And that clearly shows there is huge amount of interest of the retail investor which is coming into the stock going forward. The benign ATFs are also probably helping the stock. We feel that there could be some accumulation going forward happening and stock could ride another 10 to 15% on this sentiment. However, in the longer term, I think still not out of woods. There are certain concerns on the basic fundamentals of the operations. In case it goes another 10-15%, some profit booking should be suggested to the investor.

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