Brokerages Remain Bullish On HDFC As Q1 Profit Meets Estimates

Most analysts maintained their bullish investment recommendation on Housing Development Finance Corporation Ltd. as the mortgage lender’s earnings met estimates in the quarter ended June.

HDFC’s net profit rose 46.3 percent year-on-year to Rs 3,203 crore in the April-June period, according to its exchange filing. A stake sale in subsidiary Gruh Finance Ltd.—which is in the process of merger with Bandhan Bank Ltd.—also helped.

That came even as a provisioning of Rs 140 crore for a defunct airline account, categorised as a non-performing asset, weighed on the earnings. HDFC’s growth of advances was at a multi-quarter low of 11 percent over the previous year. Its asset quality also marginally worsened during the quarter.

Here’s what the brokerages have to say about HDFC Q1 Results 2019-20:

Kotak Securities

• Retains ‘Add’ rating with a target price of Rs 2,325 apiece.
• HDFC to trade at a premium to peers.
• Moderate performance in a challenging environment.
• Muted growth in non-retail book and higher funding costs.
• Stable retail business growth and asset quality performance key positives.

Morgan Stanley

• Maintains ‘Overweight’ with a target price of Rs 2,600 a share.
• Increase in corporate slippages largely on expected lines.
• Non-retail individual loan growth was weak partially because of high base.
• Individual AUM growth was strong at 4 percent over preceding quarter, push for affordable housing continues.
• Valuation is attractive at 2 times its FY20 core book.

Edelweiss

• Maintains ‘Buy’ with a target price of Rs 2,589 a share.
• Steady performance amid challenging environment.
• Individual growth steady; conservative in corporate segment.
• HDFC will gain from slackened competition amid weak real estate sentiments.
• Opportunity from slackened competition along with better/sustained spreads (better pricing power) will improve the company’s revenue momentum.

Motilal Oswal

• Maintains ‘Buy’ with a target price of Rs 2,600 apiece.
• Healthy retail growth; core operating performance in line.
• Over the past three quarters, HDFC has maintained a cautious stance on the wholesale segment.
• Expects well-established companies with a strong parentage would get a clear preference in raising money from debt markets and banks.

Prabhudas Lilladher

• Maintains cautious stance and downgrades to ‘Accumulate’ with a target price of Rs 2,270 apiece as growth slows.
• Core book and margins maintained.
• Non-individual portfolio continues to slacken, Gross NPA show moderate increase.
• Relative outperformer; but macro headwinds prompt downgrade.