HDFC shares to remain in focus after Q2 net profit rises 18%

HDFC’s loan book grew 16 percent YoY on asset under management basis.

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Housing Development Finance Corporation (HDFC) share price will remain in focus on November 4, a day after the company came out with its September quarter earnings.

Housing Development Finance Corporation reported a net profit of Rs 4,454.24 crore for the July-September quarter, a year-on-year (YoY) increase of 17.8 percent on the back of robust loan growth.

The housing finance company’s total interest income was Rs 13,142.93 crore, a growth of 24.2 percent from the year-ago period. Total revenue from operations was Rs 15,027.21 crore, up from Rs 12,215.95 crore a year back.

HDFC’s loan book grew 16 percent YoY on asset under management basis. The individual loan book grew by a faster 20 percent to Rs 5.89 lakh crore, the lender said in a release. This is the fastest individual loan book growth in eight years for the lender.

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Here is what brokerages have to say about stock and the company post June quarter earnings

Nomura

We have maintained the ‘buy’ rating on the stock with a target at Rs 2,850 per share.

It was an in-line quarter with asset quality continues to improve. The company continued to gain market share in core mortgages, despite increased competition.

Nomura feels that low cyclicality in NIMs and strong asset quality further lends support, reported CNBC-TV18.

CLSA

The company is nearing the end of underperformance with strong loan growth and individual book grew 19 percent on-year, said CLSA.

The NIM was flat and deposit book down on QoQ basis. The core PPoP largely in-line but asset quality is improving, it added.

The key will be for the company to deliver on deposit mobilisation, reported CNBC-TV18.

Sharekhan

We maintain a ‘buy’ rating on the stock with an unchanged SOTP-based Price Target of Rs 3,025.

Housing demand is very strong, which looks sustainable on the back of emerging trends across the young population to acquire homes at an early stage of life and it is emerging as a big aspiration among youngsters. HDFC, being the leader, would be able to capture large opportunities.

The management is optimistic about improving the asset quality matrix, further led by an improvement in collection efficiencies.

With the individual AUM growth highest in the last eight years and high yielding non-individual portfolio likely to see an uptick in growth, we expect strong AUM growth going forward. Its credit costs have declined and are likely to fall below pre-pandemic levels.

We believe that the company would emerge as the key beneficiary of the favorable macro factors play.

Motilal Oswal

We expect margin to exhibit steady improvement over the second half this fiscal. With overall provisions at 2.2 percent of EAD, HDFC has made adequate provisions for any contingencies in asset quality.

We have left unchanged our FY23/FY24 EPS estimate. We expect HDFC to deliver an AUM and PAT CAGR of 14 percent each over FY22-24, which will translate into a core RoA/RoE of 2 percent/13 percent in FY23/FY24.

We reiterate our ‘buy’ rating on HDFC with a Target Price of Rs 2,900 (premised on Mar’24E SoTP).

Nirmal Bang

HDFC’s AUM growth was on expected lines, but on operating front it was a miss as margin remained flat. NII grew by 15 percent YoY, in-line with AUM growth, as NIM was flat at 2.9 percent.

The management indicated that NIM was under pressure due to transmission lag between lending rates and the cost of funds (CoF) and change in AUM mix (individual loan book now constitutes 81 percent vs 78 percent in 2QFY22).

However, having fully passed on the rate hikes to customers, NIM is expected to improve in the coming quarters.

The management is confident in lowering the credit cost to pre-covid levels of 20bps.

We remain positive about the merger with HDFC Bank. Stable market share in a growing sector and ability to deliver 2 percent + ROAs underpin our ‘buy’ call on HDFC with a target price (TP) of Rs 3,225 (SOTP-based).

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.