HDFC, HDFC AMC rise up to 3% after Morgan Stanley maintains 'overweight'

Shares of  HDFC gained up to 2.1 per cent to Rs 2,352.8 on the BSE in the morning deals on Wednesday after global brokerage firm Morgan Stanley raised its target price to Rs 2,900 from Rs 2,600 on the back of structurally stronger position of the housing finance company.

Besides, Morgan Stanley also maintained the 'overweight' stance on sister-company HDFC Asset Management Company (AMC), with a target price of Rs 3,365, based on 40x P/E multiple. The stock touched an intra-day high of Rs 3688.2, up 2.6 per cent on the BSE.

As per reports, the brokerage firm believes that HDFC's return on equity (RoE) and earnings per share (EPS) were "poised for a multi-year recovery" and that the valuation of the stock was turning attractive. Analysts at the brokerage forecast the FY20-25 EPS CAGR of 22 per cent for the core-lending business, while they expect the core RoE's CAGR to improve to 15.5 per cent in FY22, and 18.5 per cent in FY25 from 13 per cent estimated for FY20.

"HDFC has a structurally stronger positioning (among peers), and we see a pick-up in the loan growth over the next 12 months," the firm reportedly said. It maintained it's overweight stance on the counter.

At 10:22 AM, HDFC was trading 1.34 per cent higher at Rs 2,334.75 per share, while HDFC AMC was trading 1.67 per cent higher at Rs 3,653. In comparison, the benchmaek S&P BSE Sensex was up 0.52 per cent. So far in fiscal year 2019-20, the stocks have outperformed the benchmark. While the former has surged 17 per cent, the latter has zoomed 134 per cent till Tuesday. The benchmark Sensex gained 5.5 per cent during the period.

Fundamentally, HDFC posted a 60.57 per cent year-on-year (YoY) jump in the standalone net profit at Rs 3,961.53 crore, on the back of a pre-tax gain of Rs 1,627 crore on stake sale in Gruh Finance, for the quarter ended September 2019. Revenue from operations climbed to Rs 10,478.33 crore from Rs 9,494.70 crore in the same quarter last year.

On the other hand, HDFC AMC logged a net profit of Rs 368.3 crore, up 79 per cent YoY, during Q2FY20. Total income rose by 7 per cent to Rs 549 crore from Rs 515.3 crore reported in the same period last fiscal.