Mumbai, India – HDB Financial Services Ltd, a prominent non-banking financial company and subsidiary of HDFC Bank, has announced its highest-ever quarterly profit for the first quarter of fiscal year 2027 (Q1 FY27). The company's robust performance has exceeded analyst estimates across key financial metrics, prompting several brokerages to revise their share price targets upwards.
Strong Financial Performance in Q1 FY27
For the June quarter, HDB Financial Services reported a significant surge in profitability. Profit after tax (PAT) jumped an impressive 38.3% year-over-year (YoY) and 4.6% quarter-over-quarter (QoQ). This bottom-line growth was underpinned by a 19.9% YoY increase in Net Interest Income (NII) and a healthy expansion of its Net Interest Margin (NIM) to 8.35%.
The company also demonstrated strong operational efficiency, with its lending business's cost-to-income ratio improving to 39.9% from 42.7% in Q1 FY26. Total quarterly disbursements saw a solid rise of 16.2% YoY, contributing to an 11.4% YoY growth in its overall loan book.
Improved Asset Quality and Capital Adequacy
HDB Financial Services showed marked improvement in its asset quality. Gross Stage 3 assets declined sequentially to 2.34%, indicating a healthier loan portfolio. Capital adequacy remains robust, with a Capital to Risk-Weighted Assets Ratio (CRAR) of 21.29%, providing a strong buffer for future growth and potential challenges.
Management's strategic focus on maintaining a balanced loan book, with a 74:26 split between secured and unsecured loans, continues to yield positive results. Analysts at Nomura noted that net slippages, as a percentage of opening loans, were an encouraging 1.9%, a significant improvement from ratios often exceeding 2.5% since the company's listing.
Brokerages React with Target Revisions
Following the stellar Q1 results, several institutional brokerages have updated their outlook on HDB Financial Services:
- Nirmal Bang Institutional Equities maintained a 'BUY' rating, raising its target price to Rs 890 from Rs 870, citing the strong start to FY27 and positive momentum in profitability. The brokerage's framework values the stock at 2.3x of its FY28E book value.
- Nomura reiterated a 'Neutral' rating but lifted its target to Rs 790 from Rs 740, rolling forward its valuation to June 2027 estimates and implying 2.3x June 2028 P/B.
- MOFSL also retained a 'Neutral' rating, setting a target of Rs 810. While acknowledging improvements in key operating metrics, asset quality, and margins, MOFSL highlighted that overall loan growth remains relatively subdued and awaits more sustained traction before turning more constructive on the stock.
The company's management is targeting a medium-term credit cost of 2.3%, with the reported 2.4% in Q1 FY27 aligning closely with this objective, according to analysts.