8 Quality NBFC Stocks Picked By Sharekhan With Buy & Hold Rating, Check Target Price Here

Sharekhan has picked 8 stocks with "buy" and "hold" ratings in its Q3FY2023 Results Preview report on the NBFC sector. The brokerage lists Bajaj Finance, Bajaj Finserv, HDFC Ltd, LIC Housing Finance, Canfin Homes, Cholamandalam Investment and Finance Company, Mahindra Finance, and L&T Finance Holdings in the report. Bajaj Finance, Bajaj Finserv, HDFC Ltd, LIC Housing Finance, Canfin Homes, Chola, and Mahindra Finance have been rated Buy and L&T Finance Holdings rated Hold.

The brokerage lists HDFC Ltd, Can Fin Homes, Cholamandalam Investment and Finance Company, Mahindra & Mahindra Finance and Bajaj Finance as its top pick, rated buy. Check out the details mentioned below:

Stocks- Rating and Target Price

Name of NBFCs	Rating	Target Price (Rs)
Bajaj Finance	Buy	8500
Bajaj Finserv	Buy	1950
HDFC Ltd	Buy	3025
LIC Housing Finance	Buy	435
Canfin Homes	Buy	670
Cholamandalam Investment and Finance	Buy	900
Mahindra & Mahindra Financial	Buy	275
L&T Finance Holdings	Hold	88

Eyeing steady Q3

Loan growth for NBFCs is expected to remain strong led by healthy disbursements amid strong demand and sectoral tailwinds. However, margins are expected to shrink. AUM growth is expected at 16% y-o-y/4% q-o-q for Sharekhans universe coverage of NBFCs. "We expect our coverage universe to deliver 14% /10%/16% y-o-y growth in NII/PPoP/ PAT, respectively, in Q3FY23. Asset quality is expected to improve /remain broadly stable for the universe," the brokerage has said.

Expected to report a steady performance

Sharekhan said, "We expect NBFCs across our coverage universe to report healthy performance in earnings, driven by healthy loan growth and normalization of credit costs. In case of HFCs, there could be some moderation in loan growth sequentially however for Vehicle financiers and consumer durables loans, demand was robust due to festive season. We expect margins to shrink due to the increased cost of funding especially for vehicle financiers (due to higher fixed rate book). For HFCs, there could be marginal compression in NIMs as most of the rate hike has been passed on but a part of it is yet to be reflected due to lag impact. Thus, NII growth is expected to be moderate. Opex is expected to remain high due to rise in investments in technology-led activities, increased business volumes and collections efforts. Asset-quality performance is expected to improve further as collections efficiencies continue to remain strong coupled with modest slippages. We expect a further decline in gross stage-2 and gross stage-3 loans. This should keep credit cost lower and drive the earnings growth. However, slippages from the restructured book would be key monitorable especially for LICHF."

Valuation

According to the brokerage, "NBFCs under our coverage are expected to report steady performance in earnings driven by strong disbursements, healthy loan book growth and reduction in credit cost. However, margins are expected to be lower sequentially. Asset-quality performance is expected to improve further as collections continues to remain strong coupled with modest slippages. We continue to like franchises with strong balance sheets and companies whose asset/liability mix is better to mitigate the impact on margins."

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.