HDFC shares snapped a five-consecutive days rally on November 3 when they announced their Q2 earnings. The shares were above the ₹2,500 mark on November 2 but slipped for the next 2 trading sessions (November 3 and 4). This week was broadly volatile.
On Friday, HDFC shares closed at ₹2,489.35 apiece down by ₹7.90 or 0.32% on BSE.
HDFC is the largest NBFC in terms of market share. Its valuation is over ₹4.52 lakh crore. It is the only NBFC in the top 10 most valued firms while holding the ninth rank on the chart at BSE.
During Q2FY23, the NBFC posted 17.8% yoy growth in net profit to ₹4,454 crore, while net interest income (NII) came in at ₹4,639 crore up by 12.9% yoy.
As of September 30, 2022, the company's assets under management (AUM) came in at ₹6,90,284 crore as against ₹ 5,97,339 crore in the previous year. In this period, individual loans comprise 81% of the Assets Under Management (AUM).
Meanwhile, in the quarter ending September 2022, HDFC's gross individual non-performing loans (NPLs) stood at 0.91% of the individual portfolio, while the gross non-performing non-individual loans stood at 3.99% of the non-individual portfolio.
The majority of analysts have given a buy recommendation on HDFC's share price. The stock has the potential of crossing the ₹3,200 mark going ahead.
In a report, ICICI Securities analysts said, with repricing benefits more than offsetting the cost pressures in Q2FY23, spreads improved a tad by 3bps QoQ to 2.28%. NII growth thereby retraced to 13% YoY with a 4% QoQ rise. With overall improvement in asset quality (stages-2&3 declined across individual and corporate books), credit cost was contained at <30bps (better than we expected).
Analysts note added that "Drawing further support from net gain on fair value of investments at Rs1.42 billion (Rs1.51 billion in H1FY23) and dividend income of Rs13.6bn (Rs20.5 billion in H1FY23), HDFC registered PAT growth of 17.8% YoY and 21.4% QoQ to Rs44.5bn, exceeding our expectations."
Furthermore, the analysts note said, "We expect NII growth to further gain traction in the coming quarters with repricing benefit likely to be reaped in its entirety. Maintain BUY with an SoTP target price of Rs3,205 (assigning a multiple of 2.7x to FY24E core mortgage book). Key risks: i) lagged NIM improvement; ii) modest non-individual growth transitioning into merger."
Meanwhile, Prabhudas Lilladher analysts have set a target price of ₹3,000 on HDFC with the suggestion of buying the stock. In a report, the brokerage said that the company expects this credit momentum to sustain while its share of construction finance could enhance. NIM may improve in H2FY23 as asset repricing would catch up with that of liabilities. GNPL reduced by 19bps QoQ to 1.6% while OTR/stage-2 pools also declined.
"We retain our multiple at 2.3x and rolling forward to Sep’24 core ABV we increase TP from Rs2,900 to Rs3,000. Retain BUY," Prabhudas Lilladher's note added.
On the other hand, JM Financial analysts have set a target price of ₹2,755 on HDFC.
JM Financial's note said, " Going forward, margins should recover as loans will be fully re-priced. Additionally, re-pricing period for new individual loans disbursements has also been reduced to 1 month from 3 months. We forecast HDFC to deliver core PPOP CAGR of 15% with PAT CAGR of 16% over FY22-24E, driven by AUM CAGR of 16% and reduced credit costs. We maintain BUY with a TP of ₹2,755, which is arrived as per the share swap ratio of merger with HDFC Bank (our TP of ₹1,640) used as the underlying."
In a year, HDFC shares have corrected by more than 14%. The shares were around ₹2,900 on November 4, 2021.
However, compared to its 52-week low of ₹2,026.55 apiece which was recorded on June 17, 2022, HDFC shares have surged by nearly 23% on Dalal Street.
The last time HDFC shares were around the ₹3,000 mark was in November last year. It had touched a 52-week high of ₹3,021.10 apiece on BSE on November 15, 2021.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
