HDFC Group shares falter: HDFC at 6-month low; HDFC Life hits 52-week low

HDFC, HDFC Bank, HDFC AMC and HDFC Life were underperforming the market by falling in the range of 3 per cent to 4 per as against a 1.7 per ent decline in the S&P BSE Sensex.

Shares of HDFC Group companies witnessed heavy selling pressure in trades on Monday. All the four listed firms, Housing Development Finance Corporation (HDFC), HDFC Bank, HDFC Asset Management Company (AMC) and HDFC Life Insurance Company were underperforming the market by falling in the range of 3 per cent to 4 per cent, in comparison, the S&P BSE Sensex was down 1.7 per cent at 57,644 points as of 01:45 pm.

Among the individual stocks, HDFC Life hit a 52-week low of Rs 600.15, down 4 per cent, it slipped below its previous 52-week low of Rs 615.80 hit on January 31, 2022. The stock has corrected 23 per cent from its 52-week high of Rs 775.65 touched on September 2, 2021.

For October-December quarter (Q3FY22), HDFC Life posted 3.3 per cent year-on-year (YoY) rise in net profit at Rs 273.7 crore for the quarter ended December amid a decline in income from investment. The company’s gross premium income remained healthy with a 27 per cent increase to Rs 12,255 crore, led by traction in renewal premium and new business premium. On an annualised premium equivalent basis, premiums increased by 20.4 per cent YoY to Rs 2576 crore. Opex ratio (management expense) ratio increased 70 bps QoQ to 12.3 per cent.

After witnessing the impact of Covid-19-related one-off factors on H1FY22 results, HDFC Life posted a robust incremental performance in Q3FY22. In FY23, the trajectory of growth and margins after the Exide Life merger and integration will be key to recoup the valuation premium that has narrowed in recent quarters, analysts at Emkay Global Financial Services said.

The brokerage firm reiterates a Buy rating and believe that the stock warrants a premium valuation given its track record of consistently compounding embedded value (EV) and value of new business (VNB).

Shares of HDFC hit an over six-month low of Rs 2,421, down 3 per cent on the BSE. The stock of mortgage lender was quoted at its lowest level since July 28, 2021. In the past three months, the stock has declined 16 per cent, as compared to 4 per cent fall in the Sensex.

In Q3FY22, HDFC reported an 11 per cent jump in net profit to Rs 3,261 crore in the October–December period of FY22, beating street estimates. Net profit was aided by higher income and lower-than-expected credit loss. Net interest income (NII) of the mortgage lender increased by 7 per cent to Rs 4,283.8 crore in Q3FY22 compared to Rs 4,004.74 crore in the year-ago period and net interest margin, a measure of profitability, stood at 3.6 per cent. Asset quality inched up because the lender recognised some loans as non-performing, which were overdue for less than 90 days. The gross non-performing loans (NPLs) of the lender stood at 2.32 per cent, up 32 basis points sequentially.