Motilal Oswal Reiterates Buy On Large Cap Stock, Sees 22% Upside, Recommends 1900% Dividend

Leading brokerage firm Motilal Oswal reiterates its buy on Housing Development Finance Corporation Ltd. (HDFC) for potential gains of up to 22% with a target price of Rs 3290/share. HDFC is a large cap Financial Services sector stock with a market valuation of Rs. 4,95,752 crore.

On April 15, 2023, the company recommended a dividend of Rs 19 per equity share of Re. 1 each fully paid up i.e. 1900% for the financial year 2022-23.

Recommends 1900% Dividend

According to the regulatory filing by the Board of Directors of HDFC Ltd., "Pursuant to Regulations 30, 42 and other applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time ("the Regulations"), we are pleased to inform that the Board of Directors, at its meeting held today, has recommended a dividend of Rs. 19.00 per equity share of Re. 1/- each fully paid up (i.e. 1900 %) out of the net profits for the year ended March 31, 2023, subject to the approval of the shareholders at the ensuing Annual General Meeting ("AGM") of the Bank."

It added, "The record date for determining the eligibility of members entitled to receive dividend on equity shares is Tuesday, May 16, 2023. Dividend, if approved by the shareholders of the Bank, shall be paid after the AGM to those shareholders, whose names appear in the Bank's Register of Members/ Register of Beneficial Owners maintained by the Depositories viz., National Securities Depository Limited and Central Depository Services (India) Limited as at the close of business hours on Tuesday, May 16, 2023."

Impact of higher interest rates on loan growth and delinquencies will remain the key monitorables; reiterate BUY

We expect HDFC's margin to remain largely stable over FY24/FY25. With overall provisions at 2% of EAD, HDFC has made adequate provisions for any contingencies in asset quality. We have increased our FY25 EPS estimates by 2% to factor in lower credit costs. We expect HDFC to deliver an AUM and PAT CAGR of ~14% each over FY23-25, which will translate into a core RoA/RoE of 2%/14% in FY25. We reiterate our BUY rating on the stock with a TP of INR3,290 (premised on Mar'25 SoTP).

Stock Outlook

On Friday, the stock of HDFC closed 5.58% down at Rs. 2,702.30/share. It hit the new 52-week high on May 04, 2023, at Rs. 2,867/share, while it hit the 52-week low on June 17, 2022, at Rs. 2,026/share.
The stock has fallen 2.64% in the past 1 week. However, it gained 21.98% in the past 1 year. In the past 3 years, it has given 59.91% positive return. In 5 years it has given 41.46% positive return.

Disclaimer - The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.