HUDCO share price rallied over 4% on Friday to hit a 52-week high of ₹339.50 apiece on the BSE, extending gains for the third consecutive session. Housing & Urban Development Corporation shares or HUDCO shares have jumped over 20% in one week and more than 45% in one month.
HUDCO shares have given multibagger returns of more than 165% year-to-date (YTD) and over 468% in the past one year period. The stock is up over 538% in three years.
Brokerage firm Nirmal Bang initiated coverage on multibagger HUDCO stock with a ‘Buy’ rating and a target price of ₹375 per share, implying an upside potential of more than 15% from Thursday’s closing price.
The key factors behind the brokerage firm’s positive view on HUDCO shares are its strategic position in government plans, huge growth opportunity in infrastructure lending space, government exposure at 97.5% of loan book and expectations of net interest margin (NIM) improvement.
“We have estimated HUDCO’s earnings to grow at a CAGR of 24.1% over FY24-FY26E on the back of 22.1% AUM CAGR, 30 bps improvement in NIM, stable opex costs and near zero credit costs. This will result in RoA/RoE of 2.6%/16.9% in FY26E. We have valued HUDCO at 3.6x June 2026E ABV and derive a target price (TP) of ₹375,” Nirmal Bang analysts Rati Pandit and Debesh Agarwala said in a report.
According to the analysts, due to its niche position in social housing & urban infrastructure financing, its ability to grow faster due to its robust capital position, improving margins and low risk on balance sheet, the company’s premium valuations should sustain.
HUDCO has built a strong relationship with state governments and their agencies, which gives it a better chance of providing loans to those entities.
The company has not lent to the private sector since 2013 and has provided 100% on legacy private sector NPAs, leading to best-in-class PCR of 86.9%, which indicates that credit cost will remain lower in future as 97.5% is state/central govt exposure, which is a stable asset class and hence RoA is likely to expand, the brokerage report said.
Also, since the majority of the exposure is government guaranteed, it mitigates the risk to an extent.
The brokerage firm expects NIM to increase from 3.2% at present to 3.5% in FY26E because of increased lending to better yielding urban infrastructure segment, favourable repricing trends and raising of relatively lower cost borrowings.
Moreover, with CAR of 57.65% and leverage of 4.05x, even a small change in leverage can make a significant impact on RoE, the report said.
Meanwhile, the Association of Mutual Funds in India (AMFI), in its recent stock categorisation, has upgraded HUDCO stock and classified it as a “Midcap” stock, from its earlier classification of “Smallcap”. The change will be effective from August.
At 10:50 am, HUDCO shares were trading 2.94% higher at ₹334.50 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
