Neutral HDB Financial Services; target of Rs 815: Motilal Oswal

Neutral

Motilal Oswal's research report on HDB Financial Services

HDB Financial Services’ (HDBFIN) 3QFY26 PAT rose 36% YoY/11% QoQ to ~INR6.4b (in line). Adjusted for the one-time provisioning on the new labor codes, PAT stood at INR6.8b and rose ~44% YoY. NII grew 22% YoY to ~INR22.8b (inline). Other income stood at ~INR6.8b (in line; up 9% YoY). Opex grew ~14% YoY to ~INR14b. (in line). Excluding the impact of the new labor codes, the cost to income ratio (CIR) in the lending business declined ~120bp QoQ to 39.5% (PQ: 40.7 and PY: 42.5%). Following the notification of the new labor codes, the company recognized an additional employee benefit expense of INR605m. PPoP stood at INR15.7b and grew 23% YoY.

Outlook

HDBFIN currently trades at 2.6x FY27E P/BV. We estimate a CAGR of 11%/15%/21% in disbursement/AUM/PAT over FY25-28, with RoA/RoE of ~2.5%/15% in FY28E. Reiterate Neutral with a TP of INR815 (premised on 2.5x Dec’27E BVPS).

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