Housing Development Finance Corporation (HDFC) share price has plunged 16% so far in 2022. After the initial surge in share price immediately after the merger announcement with HDFC Bank on 4 April 2022, HDFC Bank stock has corrected 15.65%. However, brokerages remain bullish and see up to 37% potential rally going forward, given that housing demand is very strong, across tier I, II & III cities and HDFC being a leader would be able to capture the large opportunity. Additionally, the merger is a step in the right direction and investors should look at it that way, they said. Several brokerages have maintained their buy call on the stock.
Should you buy, hold or sell HDFC shares?
Target price: Rs 3,025; Upside:37%
According to analysts at Sharekhan, housing demand is very strong across tier-I, -II & -III cities currently, which looks sustainable on the back of emerging trends across the young population to acquire homes at an early stage. “HDFC being the leader would be able to capture large opportunity. Management is optimistic in terms of improving collection efficiency and asset quality. With individual disbursements witnessing near historic highs and high yielding non-individual portfolio too seeing revival, we expect strong AUM growth going forward. We believe that the company would emerge as the key beneficiary of the favorable macro factors play,” they said. The brokerage has a ‘buy’ call on the stock with a target price of Rs 3,025
Motilal Oswal: Buy
Target price: Rs 2,900; Upside: 28%
HDFC reported yet another strong quarter on May 2. Earnings were buoyed by healthy NII growth and higher assignment income. Asset quality improved across both individual and non-individual segments. “Unarguably, with the merger announced, taking a view in isolation is difficult but we believe that HDFC continues to have a strong ‘Right to Win’ in its standalone mortgage business,” said Analysts at Motilal Oswal. They expect HDFC to deliver a 14% AUM and PAT CAGR each over FY22-FY24 which would translate into an RoA/RoE of 2.0%/13% in FY23-FY24, respectively. The brokerage reiterated its ‘Buy’ rating on HDFC with a target price of Rs 2,900.
ICICI Direct: Buy
Target price: Rs 2,840; Upside: 25%
HDFC 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, said analysts. “HDFC Ltd’s share price has grown 2x in the past five years. Market leadership in industry with growth opportunity & strong fundamentals bodes well. However, merger related uncertainty is likely to keep price in a broad range. We retain our BUY rating on the stock,” the brokerage said. ICICI Direct has kept target price for the stock at Rs 2,840 per share.
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