HDB Financial Services: Stock With Potential? Four Brokerages Initiate Coverage — Check Target Prices

BofA, Goldman Sachs, Morgan Stanley, and UBS Global Resesrch started coverage on HDB Financial Services Ltd. Brokerages sees potential for strong growth going forward.

HDB Financial Services has a diversified portfolio with business divided into three segments — asset finance, enterprise, and consumer products such as car, UBS Global Research said. It has most exposure in medium small enterprises belonging to commercial vehicle, construction equipment finance, loan against property, and business loan spaces. The brokerage has forecasted 16% asset under management growth in financial year 2025 and 2028.

UBS Global Research has started coverage with a 'Neutral' rating and a target price of Rs 790 apiece, which implied 5.1% upside from Friday's close.

BofA sees balanced risk-reward ratio and a strong growth potential for HDB Financial Services on the back of diversified portfolio. The company has delivered a 19% CAGR over the last decade as it targeted India's underbanked but bankable population with strong customer acquisition strategy, the brokerage said in the note.

BofA has given 'Neutral' rating with a target price of Rs 800 apiece, which implied an upside of 6.5% from Friday's close.

Goldman Sachs sees robust loan growth for HDB Financial Services with its market share being less than 1% in system loans though execution remained a key. It expects net profit growth of 24% CAGR over financial year 2025 and 2028. Its return on asset has improved, supported by expanding share of consumer finance qin the profit mix, coupled with declining cost of funds due to benign liquidity environment and improving operating leverage.

The brokerage has given a 'Neutral' rating given its balanced risk-reward due to fair valuation. The target price for the counter is Rs 808 apiece, which implied a 7.5% upside from Friday's close.

Morgan Stanley has started coverage on HDB Financial Services with an 'Equal Weight' rating and a target price of Rs 780 apiece, which implied a 3.8% upside from Friday's close price.

The stock will enter a bullish scenario in case of a sharp decline in credit costs, loan growth acceleration driving RoA closer to 3% and return on equity to 18–19%, and resulting in HDB re-rating to Cholamandalam Investment And Finance Co, Morgan Stanley said.

However, rise in credit cost, muted RoA and RoE, resulting in a de-rating in HDB Financial Services Shriram Finance Valuation will make a bear case for the stock.