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CLSA raises target price on HDFC on better-than-expected results; shares gain over 3%

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The share price of Housing Finance Development Corporation Ltd (HDFC) gained over 3 percent in the early trade on Tuesday.

CLSA raises target price on HDFC on better-than-expected results; shares gain over 3%
The share price of Housing Finance Development Corporation Ltd (HDFC) gained over 3 percent in the early trade on Tuesday as global brokerage firm CLSA raised its target on the stock after the company reported better-than-estimated earnings for the September quarter.
The stock price rose as much as 3.58 percent to an intraday high of Rs 2,115.95 on the BSE. At 9:50 am, the shares were trading 2.30 percent higher at Rs 2,089.60 on the BSE as against a 1 percent gain in the benchmark Sensex. On Monday, HDFC shares ended over 6 percent higher after the earnings announcement.
CLSA increased its target price on the stock to Rs 2,300 from Rs 2,100 earlier while maintaining an 'Outperform' rating.
The country's largest mortgage lender reported a net profit of Rs 2,870 crore for the quarter ended September 2020, ahead of the average of a CNBC-TV18 poll, which had estimated the net profit at Rs 2,346.3 crore.
Net interest income (NII) during the quarter rose 20.7 percent to Rs 3,647 crore from Rs 3,021 crore. Net interest margin (NIM) for the quarter ended September 30, 2020, stood at 3.3 percent and for the half-year ended stood at 3.2 percent.
For the quarter ended September 30, 2020, individual loan approvals grew 9 percent, disbursements were at 95 percent levels of the previous year. The growth in the non-individual loan book was 13 percent. The growth in the total loan book on an AUM basis was 10 percent, HDFC said.
“HDFC’s 2QFY21 performance was strong with NII and core mortgage PPOP growth of 21 percent each driven by improving mortgage spreads, a run-down in liquidity and an equity capital raise. Its 96.3 percent collection rate in individual mortgages was strong and indicates the majority of the moratorium taken was just out of caution,” CLSA said in a note.
Assets under management (AUM) as on September 30, 2020, stood at Rs 5,40,270 crore as against Rs 4,90,072 crore, YoY. Individual loans comprise 75 percent of the AUM.
“On its builder book, some uncertainty remains but HDFC has a buffer of over Rs 120 billion in provisions (2.6 percent of loans) and we conservatively factor-in another Rs 25 billion in provisions for 2HFY21,” CLSA added.
The brokerage also increased its core PPOP by 7-8 percent over FY21-FY23CL.

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