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Motilal Oswal Report
HDB Financial Services Ltd. currently trades at two times FY28E P/BV. Motilal Oswal estimates a CAGR of 16%/16%/25% in disbursements/AUM/PAT over FY26-28.
The brokerage reiterate Neutral rating with a target price of Rs 760 (premised on 2.3x Mar'28E book value per share). Motilal Oswal believes current valuations clearly factor in medium-term growth potential of around 15-18%, alongside improving return metrics, with RoA/RoE of ~2.6%/15% in FY28E.
HDB Financial Services appears to be moving beyond its portfolio stabilisation phase, with improving asset quality, resilient profitability, and increasing management confidence to accelerate growth across previously subdued segments.
The company enters FY27 with a healthier balance between growth, asset quality, and profitability.
Motilal Oswal believes the next two-three quarters will be crucial in validating this transition, with a broad-based recovery led by Asset Finance and Business Loans, alongside sustained momentum in Consumer Finance, potentially serving as a key earnings catalyst.
Key risks:
- slower-than-expected growth resulting in subdued AUM growth;
- deterioration in asset quality due to potential spillovers from the West Asia conflict and El Niño-related monsoon risks; and
- heightened competition in semi-urban and rural markets, potentially leading to pressure on yields.
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