Buy Housing Development Finance Corporation: target of Rs 3025: Sharekhan

Sharekhan's research report on Housing Development Finance Corporation

HDFC reported a PAT of Rs. 3,700 crore, which was above street expectations and our estimates of Rs. 3,136 crore, up by 16% y-o-y/ 13% q-o-q led by strong net interest income, which grew by 14% y-o-y/ 7% q-o-q. Higher growth in net interest income was reported mainly due to strong AUM growth (15% y-o-y; 6% q-o-q) and improvement in margins (computed) by 4 bps q-o-q to 3.01%. Spreads in non-individual book improved by 15bps q-o-q. Also reduction in liquidity buffer helped margin trajectory. Operating profits grew by 8%y-o-y / 13% q-o-q on the back of healthy NII growth. Credit costs (% of avg AUM) remained stable q-o-q at 0.26%. The gross NPL ratio improved by 41 bps q-o-q to 1.91% in Q4FY22 versus 2.32% in Q3FY22. GNPL in individual loans stood at 0.99% and in non-individual book GNPL stood at 4.76%.

Outlook

We maintain Buy rating on the stock with the revised SOTP based PT of Rs. 3,025. We believe valuations are reasonable.