What should investors do with HDFC shares post Q4 results?
On Monday, the scrip closed 1.55 per cent higher at Rs 2262.70 against the previous close of Rs 2228.15. Market cap of the mortgage player rose to Rs 4,10,233.09 crore.
- May 4, 2022,
- Updated May 4, 2022 7:36 AM IST
Shares of Housing Development Finance Corporation (HDFC) Limited are in focus as the country's largest mortgage lender posted its results of the quarter ended March 2022.
HDFC Ltd on Monday reported 16 per cent year-on-year rise in its standalone net profit at Rs 3,700 crore for the quarter ended March 2022. It had reported a net profit of Rs 3,180 crore for the year-ago period.
The total revenue from operations increased 5 per cent to Rs 12,300 crore in the quarter under review as against Rs 11,697 crore in the same quarter last fiscal, HDFC said in a regulatory filing.
HDFC's net interest income (NII) increased 14 per cent to Rs 4,601 crore compared to Rs 4,027 crore in the previous year.
On Monday, the scrip closed 1.55 per cent higher at Rs 2,262.70 against the previous close of Rs 2,228.15. Market cap of the mortgage player rose to Rs 4,10,233.09 crore.
"The quarterly results from HDFC Ltd. are largely in line with expectations. The company has shown a healthy improvement in all key metrics – disbursement, net interest margin, credit cost, asset quality and dividend payout ratio," Abhay Agarwal, Founder, and Fund Manager, Piper Serica told Business Today.
"However, in an environment of deteriorating credit quality analysts are going to closely look at the adequacy of provisioning even when HDFC has disclosed the NPLs as per RBI norms. The potential impact of higher provisioning over the next 12 months will keep the analysts on the cautious side. The higher cost of borrowing will depress the escalated net interest margins," he noted.
"We expect the demand for home mortgages to remain robust but at the same time, there is aggressive competition from PSU banks and well-funded NBFCs. HDFC has a strong leadership position in the mortgage industry and its management will be tested over the next year as it tries to find the right balance between growth and asset quality," he added.
IDBI Capital noted that HDFC’s asset quality improved led by individual portfolio. Also, restructured assets declined to 0.8 per cent (vs 1.2 per cent Q2FY22) of AUM led by recovery in single corporate account.
The brokerage firm believes HDFC continues to gain the market share backed by strong distribution and brand recall. Higher provisions on the balance sheet give the cushion in P&L from any negative impact on non-individual portfolio
It has maintained BUY rating with a target price at Rs 3,140, valuing the parent business at Rs 2,005 (2.9x P/ABV FY24) and the rest for the subsidiaries.
On April 4, HDFC announced that it will merge operations with HDFC Bank. Shares of the mortgage player and the largest private sector bank were on a roll after the merger announcement. The combined market cap even surpassed that of TCS, the country’s second-largest company in terms of market capitalization.
Meanwhile, the company's board of directors also recommended a dividend of Rs 30 per equity share of face value of Rs 2 each for the financial year 2021-22. The dividend pay-out ratio is 40 per cent.
Also read: HDFC hikes lending rate by 5 basis points; EMI to rise for existing borrower
Also read: HDFC Q4 results: Net profit rises 16% to Rs 3,700 cr, final dividend declared
Shares of Housing Development Finance Corporation (HDFC) Limited are in focus as the country's largest mortgage lender posted its results of the quarter ended March 2022.
HDFC Ltd on Monday reported 16 per cent year-on-year rise in its standalone net profit at Rs 3,700 crore for the quarter ended March 2022. It had reported a net profit of Rs 3,180 crore for the year-ago period.
The total revenue from operations increased 5 per cent to Rs 12,300 crore in the quarter under review as against Rs 11,697 crore in the same quarter last fiscal, HDFC said in a regulatory filing.
HDFC's net interest income (NII) increased 14 per cent to Rs 4,601 crore compared to Rs 4,027 crore in the previous year.
On Monday, the scrip closed 1.55 per cent higher at Rs 2,262.70 against the previous close of Rs 2,228.15. Market cap of the mortgage player rose to Rs 4,10,233.09 crore.
"The quarterly results from HDFC Ltd. are largely in line with expectations. The company has shown a healthy improvement in all key metrics – disbursement, net interest margin, credit cost, asset quality and dividend payout ratio," Abhay Agarwal, Founder, and Fund Manager, Piper Serica told Business Today.
"However, in an environment of deteriorating credit quality analysts are going to closely look at the adequacy of provisioning even when HDFC has disclosed the NPLs as per RBI norms. The potential impact of higher provisioning over the next 12 months will keep the analysts on the cautious side. The higher cost of borrowing will depress the escalated net interest margins," he noted.
"We expect the demand for home mortgages to remain robust but at the same time, there is aggressive competition from PSU banks and well-funded NBFCs. HDFC has a strong leadership position in the mortgage industry and its management will be tested over the next year as it tries to find the right balance between growth and asset quality," he added.
IDBI Capital noted that HDFC’s asset quality improved led by individual portfolio. Also, restructured assets declined to 0.8 per cent (vs 1.2 per cent Q2FY22) of AUM led by recovery in single corporate account.
The brokerage firm believes HDFC continues to gain the market share backed by strong distribution and brand recall. Higher provisions on the balance sheet give the cushion in P&L from any negative impact on non-individual portfolio
It has maintained BUY rating with a target price at Rs 3,140, valuing the parent business at Rs 2,005 (2.9x P/ABV FY24) and the rest for the subsidiaries.
On April 4, HDFC announced that it will merge operations with HDFC Bank. Shares of the mortgage player and the largest private sector bank were on a roll after the merger announcement. The combined market cap even surpassed that of TCS, the country’s second-largest company in terms of market capitalization.
Meanwhile, the company's board of directors also recommended a dividend of Rs 30 per equity share of face value of Rs 2 each for the financial year 2021-22. The dividend pay-out ratio is 40 per cent.
Also read: HDFC hikes lending rate by 5 basis points; EMI to rise for existing borrower
Also read: HDFC Q4 results: Net profit rises 16% to Rs 3,700 cr, final dividend declared