Buy HDFC; target of Rs 1454:Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on HDFCHDFC’s 3QFY16 PAT grew 6.7% YoY to INR15.2b, 3% miss. AUM growth of 14.9% (driven by 17% growth in retail portfolio); 20bp YoY contraction in calculated spreads, higher provisions due to change in loan book profile and stable asset quality (GNPA 72bp) were the key highlights. Overall AUM growth continue to clock sub 15% growth with individual AUM growing at healthy 17% YoY (+4.1% QoQ). Non-retail loan book showed signs of pickup at 9.7% YoY (2.7% QoQ), taking overall AUM to INR2.77t. Owning to hyper competition in the mortgage space HDFC had to reduce its PLR for all customers, thus resulting in calculated spreads/margin contracting by 20bp/12bp YoY to 1.18% and 3.49% respectively. Yields during the quarter contracted 73bp YoY as against 53bp YoY reduction in cost of funds HDFC’s retail loan portfolio continues to growth at healthy pace; however growth of high yielding corporate loans remains subdued. This coupled with hyper competition in mortgage space is exerting pressure on near term growth and spreads/margins. We are cutting our FY17/18 estimates by 4% to factor in the same. The stock is trading at FY17/18e AP/E of 18.7x/16.5x and ABV of 4.9x/4.4x. We assign the stock BUY rating from under review earlier as we roll our target price to FY18 SOTP. Key risk: Heightened level of competition in retail segment and delay in uptick in corporate portfolio can be a risk to earnings and growth. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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