Analyst Corner| HDFC: Maintain ‘buy’ with target price of Rs 3,340

[NiveRoshni]

Analyst Corner| HDFC: Maintain 'buy' with target price of Rs 3,340



The two key positives were strong disbursement growth of 26% and largely stable asset quality - collections 98%, restructuring 1%, stage-3 2.3%, buffer provision at 1.2%.

HDFC's 3QFY21 profit of Rs 29 bn (-65% YoY on high base from Gruh's sale) led by better topline. The two key positives were strong disbursement growth of 26% and largely stable asset quality – collections 98%, restructuring 1%, stage-3 2.3%, buffer provision at 1.2%. HDFC is better placed to leverage housing demand & potential construction-financing as it gains from its funding franchise. Loan growth can improve from 9-10% now to 15% over FY22-23. Buy.

Pick-up in retail demand; slight lag in loan-growth pick-up. The key highlight for 3Q was pick-up in retail disbursement to 26% YoY vs. decline of 5% YoY in 2Q. This reflects a combination of improved housing sales and HDFC's ability to raise resources/ run-down surplus liquidity to capitalise on demand. We understand that demand has come across completed and under-construction projects and momentum remains strong. Even with some price inflation, demand can hold up. During 3Q, retail AUMs rose by 10% YoY and we believe that growth can improve further in 1-2 quarters as new disbursements cover-up for the drag from repayment. Overall AUMs rose by 9% YOY and loans rose by 10% YoY. Stress manageable & buffer provisions reasonable. HDFC saw stage-3 loans (including proforma) being largely stable around 2.3% – although adjusted for write- offs it could have been higher at 2.45%. Collections improved further to 98% and HDFC restructured only 0.9% of AUM – 0.3% of retail loans and 2.8% of corporate loans. Part of the ECLG loans have also been held in Stage-2 loans- hence this segment rose from 5% of loans to 7%.

Source : https://www.financialexpress.com/market/analyst-corner-hdfc-maintain-buy-with-target-price-of-rs-3340/2188358/