ICICI Direct recommended hold rating on Housing and Urban Development with a target price of Rs 38 in its research report dated September 18, 2020.
ICICI Direct's research report on Housing and Urban Development
Housing and Urban Development Corporation (Hudco), a Miniratna company, plays a key role in various government schemes to develop Indian housing & urban infrastructure. Hudco reported a weak set of Q1FY21 numbers wherein muted topline and surge in provisioning dented PAT growth. Moratorium increased from ~25% in Q4FY20 to ~37-38% as of June 2020. Advances growth was muted at 3% YoY to Rs 78179 crore due to slower economic activity. Housing loan growth was healthy at 7.6% YoY to Rs 45868 crore while urban infrastructure book de-grew 2.2% YoY to Rs 32009 crore. In terms of loan composition, government agencies accounted for ~96.3% of advances while loans to private companies accounted for 3.64% of total loan book. Disbursements for the quarter was at Rs 2285 crore with a substantial portion of disbursements skewed towards low yielding social housing segment at Rs 2200
Though exposure to state government entities provides comfort, anticipation of near term volatility in provisioning and, thereby, earnings makes us adopt a cautious stance. Therefore, we maintain HOLD rating with a target price of Rs 38, valuing the stock at 0.5x FY22E EPS.
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