MUMBAI: HSBC has raised target price on Housing Development Finance Corporation (HDFC) as it believes that the mortgage giant is well positioned for potential market share gains in the current uncertain environment. HSBC has raised target price to Rs 2,500 from Rs 2,195 and maintained buy rating.
This target price increase comes after the recent rating downgrade of HDFC by Nomura. Nomura said that while the business model of HDFC is resilient, valuations are near fair value.
“Default by a large mortgage player should result in liquidity disproportionately getting easier for better managed players. HDFC, in our view, is well positioned for potential market share gains in the current uncertain environment,” said HSBC, retaining HDFC as a preferred pick among housing finance companies.
HDFC has grown its home loan book at 17% on a compounded basis in the last four financial years (FY16-19) despite stiff competition from banks and this growth contributed around 76% of its incremental loan growth during that period, said HSBC. Moreover, it has protected its market share at around 15% despite the high level of competition, said HSBC.
“Going forward, we believe there is a potential opportunity for HDFC to gain market share given that major housing finance companies (HFCs) with a cumulative market share of around 9%, and other marginal non-banks, may slow down their growth owing to liquidity, asset quality or other pertinent issues,” said HSBC.
A seasoned wholesale mortgage book and slower incremental growth Read More – Source