Brokerage firm Motilal Oswal believes that the valuations of HDFC Bank’s non-bank lending arm largely factor in the medium-term growth potential of the company and therefore, they will look for three important factors for any potential re-rating.
A clear evidence of stronger execution on loan growth, ability to navigate industry and product cycle, along with structural and not just cyclical improvement in return ratios are the three most important factors that Motilal Oswal will be watching out for any potential re-rating for HDB Financial Services.
Based on all of these factors, Motilal Oswal continues to remain “neutral” on HDB Financial but it has marginally raised its price target on the stock to ₹720 from ₹650 earlier.
HDB Financial Services reported a 22% year-on-year growth in its Net Interest Income (NII), which contributed to the 41% jump seen in the company’s profitability.
Asset quality also improved on a sequential basis with Gross NPA at 2.44% from 2.81% in the previous quarter, while Net NPA improving to 1.09% from 1.25% in the December quarter.
Motilal Oswal expects HDB Financial’s disbursements, Assets Under Management (AUM) and Profit After Tax (PAT) to grow at a Compounded Annual Growth Rate (CAGR) of 14%, 16% and 20% respectively over financial year 2026-2028, while Return on Assets (RoA) and Return on Equity (RoE) may see a 2.5% and 14.3% CAGR respectively over the same timeframe.
Shares of HDB Financial Services ended 5.2% higher on Wednesday ahead of the results announcement at ₹646.55. The stock still trades below its issue price of ₹740.
(With Inputs From Annanya Singh)
