Brokerages see 10% upside in HDFC stock post Q3 earnings

Brokerages maintained their bullish stance on HDFC after the mortgage lender posted manifold rise in net profit for the quarter ended December 31.

The company on Monday reported a four-fold jump in profit at Rs 8,372.49 crore for Q3FY20 on a yearly comparison. Its board approved raising of up to Rs 45,000 crore via NCDs. HDFC’s bottom line got a boost of Rs 9,019.81 crore through fair value gain from the merger of Gruh Finance with Bandhan Bank.

Jefferies raised the price target for HDFC to Rs 2,745 from Rs 2,510 earlier post Q3 numbers. “Owing to HDFC’s better underwriting skills, strong distribution and cost of funds advantage, it is better placed in a tough macro environment,” the global brokerage said.

Provisions of the lender spiked to Rs 2,995 crore from Rs 116 crore in the year-ago period and Rs 754 crore during the quarter. The country’s biggest mortgage lender said it continued to remain extremely conservative on provisions. It further said Rs 9,400 crore loans went to individuals in lower income category every month.

JM Financial retained a ‘buy’ rating on the stock with a price target of Rs 2,700. “We expect 16 per cent PAT CAGR for the mortgage book over FY19-22E. HDFC contributes 54 per cent to the target price with other components, HDFC Bank, HDFC Life, HDFC AMC as well as other businesses expected to strongly contribute to the parent’s valuation,” JM Financial said.

Share of HDFC traded 2.46 per cent higher at Rs 2,454.65 at around 10.35 am (IST) on Tuesday, while the benchmark BSE Sensex slipped 23 points, or 0.06 per cent, to 41,131 around the same time.