Hold HDFC; target of Rs 1323: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss's report on HDFCHDFC’s Q2FY16 earnings jumped 18% (with PAT at INR16bn marginally lower than our estimate) due to dividend income of INR4.3bn (primarily HDFC Bank’s dividend recognised in Q2 compared to Q1 in FY15). However, revenue momentum was relatively tepid with NII growth falling to sub‐10% (after growing 14% in FY15 and 17% in Q1FY16). Loan growth moderated further to 12% YoY (18% adjusting for sell down) compared to 20% 2 years ago. Not only are opportunities limited in the non‐individual segment, individual loan growth also fell to sub‐15% level (first time over many quarters; 23% adjusting for sell downs). While GNPLs inched up a tad to 71bps (69bps in Q1FY16) given rise in non‐individual segment, individualGNPLs were stable. Benefit of revision in risk weights (35%) will shore up Tier 1 capital to the extent of 100bps, taking it to 13.8%. The stock, trading at 4.5x FY17E core mortgage book, seems fairly valued. Maintain ‘HOLD’.Outlook and valuations: Fairly valued; maintain ‘HOLD’HDFC, like many peers, has cut home loan rates by 25bps following funding cost advantage. This will be further offset by benefit flowing from the recently concluded NCD + warrant issue of INR50bn at relatively lower book yield. However, moderation in balance sheet growth will cap revenue and earnings growth below 15% CAGR over FY15‐17E. Assigning 4.5x to FY17E core mortgage book, our SOTP target price is now pegged at INR1,323. We maintain ‘HOLD/ SU’, says Edelweiss research report.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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