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Last Updated : Aug 05, 2019 01:18 PM IST | Source: Moneycontrol.com

Global brokerages bullish on HDFC, raise price target after strong Q1 results

Buy call maintained, Citi raises price target to Rs 2,570 per share, Jefferies to Rs 2,435 while lowering FY21/22 EPS estimates by 7-9 per cent

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Shares of Housing Development Finance Corporation (HDFC) traded moderately higher amid volatility, as global brokerages raised price targets on the stock after its excellent June quarter earnings.

The stock has gained 10 per cent in last one year. It was quoting at Rs 2,127.90, up Rs 3.80, or 0.18 per cent on BSE at 1225 hours IST.

The housing finance major reported a massive 46 per cent year-on-year growth in June quarter profit at Rs 3,203 crore, driven by a stake sale in Gruh Finance, and showed 14 per cent increase in net interest income at Rs 3,129.8 crore with lower-than-expected loan growth.

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The assets under management (AUM) growth at 12.8 per cent YoY was lowest due to non-individual loan book growth at 2.24 per cent YoY, but individual loan growth remained strong at 15.3 per cent YoY.

"Q1 AUM growth moderated further with stable spreads, but some of the large housing finance companies are going slow, which should help HDFC grow on the asset side," said Citi, which maintained its buy call on the stock and raised price target to Rs 2,570 from Rs 2,360 per share.

Liability side should benefit from falling wholesale costs, Citi believes, while raising FY20 net profit estimate by 8 per cent to factor in the Gruh Finance stake sale.

On the asset quality front, gross non-performing assets (NPA) were the highest ever for HDFC. Gross NPA in the non-individual portfolio increased to 2.68 per cent against 2.34 per cent. Individual gross NPA rose to 0.72 per cent versus 0.7 per cent on a sequential basis. Overall gross NPA increased to 1.29 per cent in Q1 against 1.18 per cent in the March quarter.

"Asset quality faced some pressure with downgraded exposure to Jet Airways," said CLSA, which added that HDFC remained its top pick and maintained a buy call, with a target at Rs 2,770 per share.

Jefferies also retained a buy call on the stock, and increased its target price to Rs 2,435 from Rs 2,310 per share, but cut FY21/22 EPS estimates by 7-9 per cent and forecast an AUM CAGR of 13.4 per cent.

The brokerage also lowered its loan growth and margin estimate for FY21/22 and raised credit cost estimates for FY20, factoring in exposure in a few stressed corporate assets.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Aug 5, 2019 01:18 pm
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