'Hold' HDFC Ltd - TP Rs. 681 - Geojit BNP Paribas Financial Services

Target price has been reduced to Rs.681 from Rs.696 to reflect the earnings revision of 1-3%.

- Despite heavy competition from in the retail home loan segment, HDFC Ltd has not only held on to its market share among the top five players but it has also outpaced scheduled commercial bank's lending to the home loan segment.

- HDFC's loan book to grow 18-20% in FY13 with stable spreads and healthy fee income growth.

- The company is expected to benefit from any cut in bank lending rates as its liability side would get re-priced faster than that of banks and this will provide near-term upside to margins.

- A rate cut would also help home-finance companies position their rates more competitively in the individual loan segment and sustain loan growth amid rising competition from banks.

- HDFC Bank is preferred to HDFC because of HDFC Bank's stronger liability franchise and consistent improvement in core profitability in the past few years. Valuation of both the companies remains at a premium to the sector.

- Target price for HDFC is at 3.6 times of FY13 expected book value.

Source : Equity Bulls

Keywords