India’s largest mortgage lender HDFC’s shares have returned about 15% in the last one year, marginally higher than the Nifty at 12.3%. Notably, in the last three months, the shares have lagged the benchemark, returning about 5.5% as compared to Nifty returns of 7%. Have the shares become attractive following recent underperformance? Global financial services major Goldman Sachs says that HDFC shares are attractive at the current valuations. Goldman Sachs has upgraded the shares to buy from neutral earlier. The firm notes that HDFC is a market leader in mortgages, and the demand drivers for HDFC are getting better.
In the latest quarter ended March-18, India’s largest mortgage lender HDFC reported a near 40% on-year rise in its standalone net profit for March quarter at Rs 2,846.22 crore from Rs 2,044.22 crore. The numbers came in beating analyst estimates. The total income of the HDFC came in at Rs 9,633.89 crore, up 13 per cent on-year against Rs 8,514.51 crore. Goldman Sachs said that earnings are at an inflection point with rising confidence. NII (net interest income) for the bank stood at Rs 3,617 crore, up 12.4 per cent on-year against Rs 3,216 crore in the corresponding quarter last year.
The provisions for the quarter stood at Rs 180 crore against Rs 150 crore in the year-ago period. HDFC shares were trading at Rs 1,898 on BSE this morning. Goldman Sachs has a target price of Rs 2,188. The shares were trading at Rs 1,898 on BSE this morning. The firm’s target price implies an upside of more than 15% from the current market prices.
Meanwhile, shares of PNB Housing Finance climbed more than 7 per cent to Rs 1,148.9, in their biggest intraday gain since March 27, after news reports said that Housing Development Finance Corp (HDFC) and Kotak Mahindra Bank are competing for a controlling stake in PNB Housing Finance as they aim to gain wider coverage in a mortgage market that’s seen among the safest of havens in the lending world.