Emkay Global Financial' research report on HDB Financial Services
Our positive view is due to 1) HDBFS being a highly diversified (geographically and product-wise), extremely granular (top 20 accounts constitute ~0.34% of AUM), and large-scale lending franchise with over 19mn customers. It has seen multiple credit cycles, Covid, and built from scratch with a bottomup approach. 2) Its strategy of focusing on direct sourcing (~82% of FY25 disbursements), remote areas (70% branches are in tier 4 towns and beyond), and lowto-mid-income groups with limited to no credit history has been driven by the skilled top management (most have been in HDBFS for over 10Y), reflecting strong conviction and consistency. 3) With a favorable interest rate cycle amid frontloaded repo rate cuts driving NIM expansion, credit cost moderation, and the growth outlook improving, HDBFS is well positioned to improve profits/growth, to achieve 2.7%/17% RoA/RoE, respectively, by Mar-28, and deliver ~20%/27% AUM/EPS CAGR over FY25-28E.
Outlook
We initiate coverage on HDB Financial Services (HDBFS) with BUY and Jun-26E TP of Rs900 (+22% upside), on FY27E P/B of 3.0x.
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