Housing Development Finance Corp. Ltd (HDFC) shares jumped 2% in intra-day trade on Wednesday, November 27, after global brokerage firm Morgan Stanley maintained its ‘overweight’ call on the lender and raised its target price to Rs 2,900 per share from Rs 2,600.
HDFC shares closed the session 1.5% higher at Rs 2,338 apiece, after hitting the day’s high of Rs 2,352. Notably, the stock has returned investors over 11% in the past one month and 23% in the past one year.
Morgan Stanley said it is of the view that HDFC’s return on equity (RoE) and earnings per share (EPS) growth is poised to stage a multi-year recovery, supported by structurally stronger positioning among non-banking lenders.
The brokerage firm says that HDFC’s core lending business should see earnings per share (EPS) post a compounded annual growth rate of 22%over FY20-25. It also expects core return on equity (RoE) to improve to 15.5% in FY22 and 18.5% in FY25 from 13% in FY20.
Morgan Stanley added that HDFC’s current valuation looks attractive given that a pick-up in loan growth is expected over the next 12 months.
In the September quarter, HDFC had posted a massive 60.57% year-on-year jump in its stand-alone net profit at Rs 3,961.53 crore, mainly on the back of a pre-tax gain of Rs 1,627 crore on stake sale in Gruh Finance. Revenue during the quarter had risen to Rs 10,478.33 crore from Rs 9,494.70 crore a year ago.
Meanwhile, Morgan Stanley also maintained the ‘overweight’ call on HDFC’s sister company HDFC Asset Management Co. Ltd, keeping the target price of Rs 3,365. The stock closed the day at Rs 3,633, up 1.5%, after hitting an intra-day high of Rs 3,690.