HDFC stays with a worth target of Rs 3,300
The annual report of HDFC, for FY21, showed 67% of new stage-3 loans occurred from stage 2 and the backtesting of FY22. Also, 0.4% of loans were within the debt-asset swap.
A rise in assets from 9% to 15% over the financial year 17-21 is a drag on core ROE even as core ROA rose and leverage would elevate ROE. In FY21, its stage 3 loans rose up to 13% YoY to 2.3% of loans. 67% of the gross addition was from stage-2 loans and moreover from the corporate or company loans.
Backtesting of FY22 stage-3 forecasts with trends for FY21 indicates a buffer in forecasts.
Some other trends are as follows:
- HDFC has assets worth up to 18 Billion
- The NPL ratios in the select corporate seats are as high as 15-27%. NPL ratio being 4.8%
Retail loans have risen by 12% YoY. YoY was driven by a 9% increase in the average ticket size reflecting strong demand in projects and high-end clients.
Better leverage to aid ROE; ‘buy’ stays: During FY17-21, a rise in the asset was seen from 9% to 15%, dragged ROE from 19% to 13% even as core ROA risen from 1.7% to 1.9%.
Our ‘buy call stays with a price target of Rs. 3,330 shares with a value of lending business t 2.6x Jun23.
Key highlights from Mr Parekh’s letter &MD&A are as follows
- Regulators shouldn’t see a reset in lending rates as restructuring of the loans
- Adjusting norms on asset mix for liquid asset
- The share of individual housing loans in total is ahead of goals set for March-24 but the share of housing loans in a total asset at 58% is lower than the target of 60% by March-24