Buy This Large Cap NBFC Stock, Shares Can Surge 15%, Says ICICI Direct

Leading brokerage firm ICICI Direct has placed a buy call on HDFC Ltd. for gains of up to 15% with a target price of Rs 2,850 per share in 12 months. HDFC Ltd is the largest NBFC engaged in the housing finance business. It has demonstrated a consistent performance in terms of both business growth as well as asset quality. Individual loans contribute ~81% of AUM. Stake in subsidiaries in insurance, and asset management business aids value.

Stock Outlook & Returns on investment

The HDFC shares last traded at Rs 2,486.65 per share on NSE. The 52-week high level of the stock is Rs 3,021.10 per share and the 52-week low level of the stock is Rs 2,026 per share, respectively. It has a market cap of Rs 4,51,195 crore.

It has given a positive return of 3.59% in a week, and 5.84% in a month, respectively. It gave a 5.29% positive return in the past 3 months. However, in the past 1 year, it has given a negative return of 14.24%. In 3 years, the stock gave a positive return of 14% and in the past 5 years, it gave a multibagger return of 39.99%.

 

Q2FY23 Results

HDFC reported a decent performance.  Loan growth at 14.3% YoY wherein individual loans were up 20% YoY  NII up 12.9% YoY, NIMs steady at 3.4% owing to lag in rate transmission  Provisions lower QoQ, up 4.6% YoY; PAT up 17.8% YoY at Rs 4454 crore  GNPA down 34 bps QoQ to 1.44%. R/s book flat QoQ at 0.70% of loans.

Buy for a target price of Rs 2,850 per share

HDFC Ltd's share price has grown ~44% in the past five years. Its market positioning with healthy demand outlook and strong fundamentals bodes well. However, merger related uncertainty is expected to keep the price in a range. "We retain our BUY rating on the stock. We maintain our multiple at ~2x FY24E core ABV and Rs 1390 (15% discount) for subsidiaries and revise our Target Price from Rs 2800 to Rs 2850," the brokerage has said.

Key triggers for future price performance

Continued strong demand across segments (affordable & high value) and geographies (metro and non-metros) augurs well for business growth. Monthly reset of incremental disbursements to aid transmission of yields at a faster pace. Margins to remain steady in the near term. Healthy provision buffer and steady collection to keep credit costs lower. Merger related clarification and approval could lead to near term volatility.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. 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 check with certified experts before making any investment decision.