Nomura upgraded Housing Development Finance Corporation Ltd. to ‘Buy' from ‘Neutral', on the back of its core mortgage business and “best in class”subsidiaries.
The target price is 5.7 percent above the consensus average of Rs 1,891.27.
The Japanese brokerage firm expects the mortgage business in India to pick up on the back of the affordable housing scheme. Growth may have been muted because of economic triggers like demonetisation, Goods and Services Tax and the Real Estate (Regulation and Development) Act, but all of this can be left behind, it said in a report.
Along with this, valuations of HDFC are also not that demanding. Nomura adds that HDFC trading near Rs 1,709 per share implies that it will trade at 12 times the expected price to earnings ratio of March 2020.
Subsidiaries of HDFC, said Nomura, is worth more than 50 percent of the sum of its parts with HDFC Bank Ltd. alone contributing 30 percent.
As the mortgage business is well funded, we believe HDFC's strategy of investing more in its subsidiaries will lead to high-value accretion for investors.Nomura Report
Nomura's growth outlook for HDFC's subsidiary businesses exceed a compounded annual growth rate of 20 percent over four financial years up to March 2020.
After Nomura's upgrade, 31 analysts continue to have a ‘buy' recommendation on the stock, out of which seven of them have a target price of Rs 2,000 and more.
Five analysts recommend ‘hold', while only two analysts have a ‘sell' recommendation.
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