Nirmal Bang initiates coverage on HUDCO, sees upside potential of 12%
Nirmal Bang starts coverage on HUDCO with a target price of Rs 375. Company projected to achieve 24.1% earnings growth CAGR by FY26E.
Domestic brokerage firm initiated coverage on Housing and Urban Development Corporation () with a target price of Rs 375 stating that the company is a stepping up growth accelerator in .“We have estimated HUDCO’s earnings to grow at a of 24.1% over FY24-FY26E on the back of 22.1% AUM CAGR, 30bps improvement in NIM, stable opex costs and near zero credit costs. This will result in RoA/RoE of 2.6%/16.9% in FY26E,” said Nirmal Bang in its report.
The upside in the stock is seen primarily due to factors like the company’s strategic position in government plans, a huge growth opportunity in infra lending space, government exposure at 97.5% of loan book, improvement in NIM and strong capital position.
HUDCO has built a strong relationship with state governments and their agencies, which gives it a better chance of providing loans to those entities.
The company has not lent to the private sector since 2013 and has provided 100% on legacy private sector NPAs, leading to best-in-class PCR of 86.9%, which indicates that credit cost will remain lower in future as 97.5% is state/central government exposure, which is a stable asset class and hence RoA is likely to expand.
Also read:
“We expect NIM to increase from 3.2% at present to 3.5% in FY26E because of increased lending to better yielding urban infrastructure segment, favourable repricing trends and raising of relatively lower cost borrowings,” said the domestic brokerage firm.
Shares of HUDCO have multiplied 6 times in the last one year alone, giving 162% returns in the last 6 months alone.
were trading 3% higher at Rs 335 around 11 am on BSE today.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Source: Stocks-Markets-Economic Times
