Buy Housing and Urban Development Corporation, target price Rs 40: HDFC Securities

HDFC Securities has buy call on Housing and Urban Development Corporation with a target price of Rs 40. The current market price of Housing and Urban Development Corporation Ltd. is Rs 35. Time period given by analyst is 6 months when Housing and Urban Development Corporation price can reach defined target.

Housing and Urban Development Corporation Ltd., incorporated in the year 1970, is a Mid Cap company (having a market cap of Rs 7006.65 Crore) operating in NBFC sector.

Housing and Urban Development Corporation Ltd. key Products/Revenue Segments include Interest, Rental Income, Income From Sale Of Share & Securities, Fees & Commission Income, Dividend and Sale of services for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1744.28 Crore, up 2.04 % from last quarter Total Income of Rs 1709.41 Crore and down -1.89 % from last year same quarter Total Income of Rs 1777.85 Crore. Company reported net profit after tax of Rs 746.90 Crore in latest quarter.

Investment Rationale
The brokerage expects the loan book of the company to grow at a conservative CAGR of ~11% over FY22-FY24. PAT is expected to grow at a muted 2% CAGR on account of higher base due to exceptional items, stable spreads and higher delinquencies. FY22 profit was aided by provision writeback of Rs 246cr lifting RoA to 2.2%. The benefit of writeback might not be available in the coming years and it expects RoA to hover around the 2% mark. Most of the concerns seem to be reflected in the price and the stock is available at an inexpensive valuation. The company has announced final dividend of Rs 2.75 for FY22 (in addition to Rs 0.75 interim paid out in March/April 2022), the book closure for which is likely to be in Sep’22. The stock offers a good dividend yield. It believes investors can buy the stock on dips in the band of Rs 33.5-34 (0.42x FY24E ABV) and add further in Rs 31-31.5 band (0.39x FY24E ABV) for base case fair value of Rs 38 (0.47x FY24E ABV) and bull case fair value of Rs 40 (0.5x FY24E ABV) in the next two quarters.

Promoter/FII Holdings
Promoters held 81.81 per cent stake in the company as of 31-Mar-2022, while FIIs owned 0.21 per cent, DIIs 7.96 per cent.