Wednesday, November 25

Analysts see up to 19% upside in HDFC shares post Q2

NEW DELHI: Brokerages retained their bullish view on Housing Development Finance Corporation (HDFC) after it posted better-than-expected financial results for the quarter ended September 30.
Emkay Global Financial Services is bullish on HDFC with a 12-month price target of Rs 2,320, indicating an upside of over 12 per cent from the current market price of Rs 2,067.

“HDFC remains our top pick in the NBFC/HFC space due to a relatively longer asset maturity duration (supporting AUM growth), superior liability franchise and lower default risk. We raise FY22 and FY23E earnings by around 5.7 per cent and 4 per cent, respectively,” Emkay said, adding that HDFC is able to gain the market share, especially from other housing finance companies and even smaller banks, due to its superior liability franchise providing it an advantage on the cost of fund.

The country’s largest mortgage lender reported a profit of Rs 2,870.12 crore against a Rs 2,360 crore estimate that analysts had made in an ETNow poll.

The company had reported a profit of Rs 3,961.53 crore for the corresponding quarter last year. In a regulatory filing, HDFC also said, the profit numbers are not comparable due to dividend income and profit on sale of investments of Rs 323 crore. The figure stood at Rs 2,701 crore last year.

Net interest income (NII) increased 21 per cent YoY to Rs 3,647 crore. On the other hand, net interest margin (NIM) for the quarter stood at 3.3 per cent and for the half-year at 3.2 per cent.

Antique Stock Broking is also positive on HDFC with a target of Rs 2,216.

“Traction in the individual loan was encouraging on the backdrop of Covid-related disruption. This coupled with lower borrowing cost and QIP money raised in August 2020 aided margins and NII growth. Lower dividend and profit from sale of investments during quarter lead to de-growth at pre-provision profit (PPP) level, adjusted for that growth would have been healthy,” the brokerage added.

Motilal Oswal Financial Services has set a price target of Rs 2,450. This shows nearly 19 per cent upside in the stock from the current market price.

“With the sharp fall in the cost of funds, we have increased spread estimates by around 10 basis points. However, higher ESOP cost is leading to largely unchanged core profit before tax estimates. We cut our profit after tax estimates due to lack of clarity on regulations related to dividend income from subsidiaries. We expect HDFC to report core return on assets (RoA) and return on equity (RoE) of 2 per cent and 12 per cent over FY22 and FY23E,” Motilal Oswal said.

Credit: Stocks-Markets-Economic Times

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