Nirmal Bang sees over 40% upside in this large-cap stock! Should you consider?

Nirmal Bang is bullish on Housing Development Finance Corp (HDFC) and believes that the recent correction provides an opportunity for investors.
 
The brokerage house has a buy rating on the stock with a target price of Rs 3,530 per share. So, if you compare it with the current market price, the stock has an upside potential of over 44 per cent.
 
The large-cap stock opened a tad higher at Rs 2,472 against the previous close of Rs 2,454.05. At 13:40 hours, the shares were trading flat at Rs 2,455.85. With a market cap of more than Rs 4,40,000 crore, the shares stand higher than 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.
 
Nirmal Bang said that HDFC Ltd offers one of the best opportunities in the non-banking space given its large market share in housing finance. It noted that asset quality, though never a major issue for the company, is expected to improve. Provisioning buffer on the balance sheet is comfortable at 2.4 per cent.
 
"Near term margin should pick up, aided by shedding of excess balance sheet liquidity. The management is guiding for 3.2-3.6 per cent as steady-state margin going forward. We estimate HDFC’s core business to deliver 14.5-15 per cent ROE over FY23-24E, partially aided by declining credit costs," it said.
 
"Since hitting the peak in Nov’21, the stock is down 24 per cent compared to 6-9 per cent fall in broader indices. We think that current valuation (for core business) at 1.6x 1-year forward BV does not fully capture the company’s market positioning in a cyclical/sector upturn and its ability to deliver more than 2.2/~15 per cent ROA/ROE," the brokerage house added.
 
Societe Generale on Tuesday offloaded shares of Housing Development Finance Corp (HDFC) worth nearly Rs 1,730 crore through an open market transaction. As per block deal data on BSE, Societe Generale sold nearly 71 lakh shares at an average price of Rs 2,436.8 apiece. The total deal value stood at Rs 1,729.67 crore.
 
Recently, HDFC reported a 11 per cent year-on-year rise in its net profit for the October-December quarter at Rs 3,261 crore. The total revenue from operations registered a marginal growth at Rs 11,784 crore during the December quarter as against Rs 11,707 crore in the corresponding quarter of previous year.
 
The company's net interest income (NII) grew 7 per cent to Rs 4,284 crore during the quarter under review from Rs 4,005 crore in the year-ago quarter.