ICICI Lombard, Delhivery, HDFC Bank: CLSA sees up to 30% upside on these 3 stocks

CLSA on Friday maintained its 'Buy' ratings on Delhivery Ltd, ICICI Lombard and HDFC Bank while suggesting 14-30 per cent potential upsides on the three counters over a period of 12 months. In the light of resignation of ICICI Lombard's MD and CEO Bhargav Dasgupta, CLSA said the business leadership team remains strong which should smoothen the transition process. On HDFC Bank, it said a $2.5 billion drop in HDFC Bank's net worth is not an economic loss and is mostly an accounting impact. It called Delhivery a strong play on ecommerce adoption in India. 

CLSA said Bhargav resigned after 14 years as MD and CEO of ICICI Lombard. During this period, the premiums at ICICI Lombard grew six folds.  "His successor will be announced soon and we expect minimal business impact from this transition given the strong leadership team at ICICI Lombard. The insurance regulator caps the tenure of MDs and CEOs at 15 years, per which, Bhargav’s tenure would have otherwise ended in April 2024. Bhargav indicated that he is heading for an opportunity outside India," CLSA noted.

CLSA said Bhargav's resignation letter indicated that the succession planning process at ICICI Lombard has already been initiated and the successor shall soon be announced. "ICICI Lombard has a stable and strong business leadership team and this should smoothen the transition process. We expect minimal business impact from the change," it said while suggesting a target of Rs 1,550 on the stock. The target suggests a 14 per cent potential upside on the counter.

On HDFC Bank, CLSA noted that HDFC Bank marked down S$2.5 billion to HDFC’s net worth due to several factors, including a change in the accounting standard. CLSA said it concluded that the bulk of this $2.5 billion hit will actually be recouped over time, and will not result in any economic loss to the franchise.

"We, however, do believe that the 25-30 bps dilution in NIM due to excess liquidity is an actual economic loss and is here to stay for the medium term. We maintain our Buy rating on a reasonable valuation at an unchanged target of Rs 2,025," it said.

In the case of Delhivery, CLSA said the company is a strong play on ecommerce adoption in India. "The company is also scaling its part truck load business after hiccups in FY23, but we would like to see better disclosures on PTL business profitability," it said. PTL stands for partial truckload.

Delhivery plans to improve its margins in the PTL business through price revisions and actively churning out lower-margin customers, CLSA noted. The brokerage has a target of Rs 550 on the stock, which suggests  28 per cent potential upside.

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