Motilal Oswal is bullish on HDFC has recommended buy rating on the stock with a target price of Rs 2300 in its research report dated January 29, 2019.
Motilal Oswal's research report on HDFC
HDFC reported PAT of INR21.1b in 3QFY19, 9% above our estimate of INR19.4b, led by NII beat, lower-than-expected opex and a lower tax rate. The company scaled back on the corporate lending business, while the retail lending business was largely unaffected. AUM grew 3% QoQ/15% YoY to INR4.4t, driven by growth of 18% YoY in retail lending and 8% YoY (slowest in past three years) in corporate lending. NII growth came in at a robust 26% YoY (v/s 15% AUM growth), driven by (a) stable spreads, (b) higher assignment income in the quarter and (c) lower leverage due to capital raise and warrant conversion. Reported spreads and margins were largely stable at 2.3% and 3.2%, respectively. Interestingly, calculated cost of funds remained unchanged on a sequential basis at 8.35%.
Over the past nine months, HDFC has hiked its home loan rate by 60-70bp, resulting in improved profitability versus the past two years. While corporate loan growth has slowed down, we believe it is only cyclical and should revert to normal soon. We largely maintain our FY19/20 estimates. Maintain Buy with an SOTP-based TP of INR2,300.
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