HDFC crosses Rs 1,700, hits record high as analysts raise target price post Q1 nos

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26 Aug, 2025 12:21

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Housing Development Finance Corporation (HDFC) share price crossed Rs 1,700-mark and hit fresh record high of Rs 1,710.50 on Thursday, up 4.7 percent intraday as brokerages retained positive stance on the stock post Q1 earnings.

While reiterating buy rating on the stock with increased target price at Rs 1,925 (from Rs 1,791 earlier), Bank of America Merrill Lynch said the growth story is intact and asset quality remained manageable after Q1 earnings.

"We value HDFC's standalone business at Rs 1,925 valued at P/B multiple of 3.4x (same as earlier) which we justify on basis of 1) best in class return on equities at over 20 percent, 2) book consists of highly preferred mortgage assets. The target price includes subsidiaries value of Rs 895. This increase in value is largely driven by higher valuation for HDFC Bank," the research house explained.

It believes HDFC may tend to trade on PE basis versus price-to-book value, as it continues to deliver consistent earnings growth. It further believes that home loan sector is at an inflection point and industry leader such as HDFC is likely to be a key beneficiary.

Deutsche Bank also raised target price by 2.2 percent to Rs 1,840 (from Rs 1,800 earlier) as it has factored in new higher target price on HDFC Bank. The research house has a buy rating on the stock.

HDFC reported a mixed quarter as loan growth was higher at 18 percent YoY (despite competitive pressure in mortgages), spread was slightly lower QoQ at 2.29 percent (but higher than 2.26 percent in Q1FY17) - due partly to non-accrual of interest on NPLs.

Retail grew 16 percent, while corporate growth remained strong at 22 percent. Retail loan (72 percent of AUM) disbursements grew 21% YoY.

Bank of America Merrill Lynch believes asset quality remains manageable, with gross non-performing loans (NPL) ratio moved to 1.12 percent (from 0.79 percent in Q4FY17) mainly due to one corporate account; and retail NPLs at 65bp (versus 61bp QoQ).

The Essar exposure of Rs 979 crore turned NPL this quarter. The exposure was already covered by a contingency provision, so the incremental P&L impact was a small non-accrual of interest. Except for the Essar slippage, asset quality remained stable – the 33bp QoQ jump in gross NPL ratio was entirely from Essar, JP Morgan said.

"The stock remains a defensive long-term core holding, in our view. We maintains overweight rating on the stock with target price of Rs 1,700," JP Morgan said.

HDFC's profit after tax declined by 17 percent YoY - due to elevated base as HDFC had booked sizable profits on sale of its stake in HDFC ERGO in Q1FY17 and a higher tax rate of 34 percent (30.7 percent in Q1FY17. Excluding this one-off, the profit before tax growth was 15 percent YoY in Q1FY18.

Net interest income grew at 16 percent and individual loan grew by 16 percent with individual non-performing loans steady at 0.65 percent.

Motilal Oswal upgraded its estimates by around 5 percent to factor in better-than-expected corporate loan growth. It expects core PBT CAGR around 14 percent over FY17-20. It also expects AUM CAGR of around 16 percent.

The research house has a buy rating with an SOTP-based target price of Rs 1,900.

At 12:52 hours IST, the stock price was quoting at Rs 1,701.80, up Rs 68.55, or 4.20 percent on the BSE.

Posted by Sunil Shankar Matkar