Housing Development Finance Corporation (HDFC) on Thursday reported a 13 percent year-on-year (YoY) rise in its net profit for the third quarter ended December 2022 at ₹3,691 crore versus ₹3,260 crore in the year-ago quarter. Its revenue from operations rose 29 percent YoY to ₹15,230 crore as against ₹11,783 crore.
The net interest income (NII) for the quarter also jumped 13 percent to ₹4,840 crore as compared to ₹4,284 crore in the same quarter last year.
The lender's asset quality also remained steady and the share of gross bad loans fell to 1.49 percent of the loan book from 2.32 percent a year ago. In the individual loan book, gross bad loans were just 0.86 percent versus 1.44 percent in the year-ago period.
Vice-Chairman and Chief Executive Officer Keki Mistry said profit growth had been restricted due to rate hikes by the RBI, adding that while the company's liabilities got repriced faster, it took a while for the assets to reflect the newer rates.
He said the company was yet to receive any communication from the RBI on its application for multiple regulatory leeways to continue after the merger. He said the transmission lag between asset and liability repricing was generally one quarter, and the company would start reporting better growth numbers thereafter.
Assets under management (AUMs) for Q3 rose 13.3 percent (YoY) to more than ₹7 lakh crore from ₹6.1 lakh crore at the end of December 2021.
Most brokerages tracking HDFC have maintained their estimates on the company after the December quarter results beat expectations.
Motilal Oswal
The brokerage has a ‘buy’ call on the stock post its Q3 results announcement with a target price of ₹3,050, implying an upside of 17 percent. HDFC continues to have a strong ‘right to win’ in its standalone mortgage business, noted MOSL.
The brokerage also pointed out that HDFC has raised its lending interest rates by 35 bps in Q3FY23, the benefit of which would reflect in the next quarter. With expectations of a near-end to the repo rate hike cycle, it sees HDFC's margins improving slightly and then stabilizing over the next three to six months. It also expects asset quality would continue to exhibit strength and model credit costs of 25 bps/20 bps for FY24/FY25, respectively.
MOSL said that its estimates are largely unchanged and expects HDFC to deliver an AUM and PAT CAGR of 13 percent and 14 percent over FY23-25, respectively, which will translate into a core RoA (Return on Asset)/RoE (Return on Equity) of 2 percent/14 percent by FY25.
Nirmal Bang
The brokerage also has a ‘buy’ call on the lender with a target price of ₹3,159, implying a potential upside of 21 percent. The brokerage noted that HDFC reported a largely in-line set of results for Q3FY23, with PAT growing 13 percent YoY on the back of stable margins and lower provisions. AUM growth came in at 13 percent YoY, largely driven by retail loans.
Overall asset quality also improved sequentially, led by a decline in both individuals as well as non-individual NPAs. The management is confident of housing demand trends sustaining going ahead and expects individual loan growth to continue to remain healthy, it said. Nirmal Bang remains positive about the merger with HDFC Bank. "Stable market share in a growing Housing Finance sector and ability to deliver over 2 percent ROAs underpin our BUY call on HDFC with a target price (TP) of Rs3,159 (SOTP-based)," it said.
Prabhudas Lilladher
Post the Q3 numbers, the brokerage stated that its core profitability estimates for HDFC for FY24/25E largely remain unchanged, while NIM and merger-related approvals remain key monitorable.
HDFC Q3FY23 earnings were mixed. While core PAT missed its estimates slightly due to lower NII and assignment income, asset quality was better, PL said.
With asset repricing catching up with liabilities and an increase in lending rates, NIM could further improve by +10bps to 3.49 percent in Q4FY23, predicted PL. It maintains HDFC's multiple at 2.3x on Sep’24 core ABV and kept the target unchanged at ₹3,000, implying a 15 percent upside. It retained a ‘buy’ call.
Stock price trend
Shares of HDFC fell 1.8 percent in trade on Thursday after the NBFC posted its December quarter earnings. However, the stock recovered to rise over 2 percent to ₹2,674 in intra-day deals on Friday. The stock has been muted in 2023 so far, up just 1 percent YTD. It has been completely flat in the last 1 year as well.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
