HUDCO‘s share price has gone up over 120% since the start of the year, but analysts at Nirmal Bang think the stock still has some steam left.

The HUDCO Analyst: The analyst team at Nirmal Bang maintained its “buy” rating for the stock with a price target of ₹375. The target reflects an around 30% upside from the stock’s current levels.

The HUDCO Thesis: The brokerage said that HUDCO’s Q1FY25 performance aligned with expectations at the profit level, with slight variations in net interest income, pre-provision operating profit and profit after tax. Specifically, net interest income and pre-provision operating profit were slightly below estimates by 11.7% and 10.8%, respectively, while PAT was marginally higher by 0.3%.

The analysts also added that the company demonstrated robust loan growth, with a 30% year-on-year and 12% quarter-on-quarter increase. This growth was primarily driven by a substantial rise in disbursements, up 1,906% year on year and 23.5% sequentially, with the Urban Infrastructure segment contributing significantly.

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HUDCO is well-positioned to benefit from the announcement of 10 million houses under the PMAY (Urban) scheme in the Union Budget, leading to an expected acceleration in sanctions and disbursements within the housing segment, the analysts noted.

Asset quality improved, with the gross non-performing assets (GNPA) ratio decreasing from 2.71% in Q4FY24 to 2.42% in Q1FY25, and the provision coverage ratio standing at 86.6%. Of the ₹2,500 crore in GNPA, around ₹2,000 crore is related to legacy private sector loans, which are fully provided for.

HUDCO also has exposure to 10 accounts totalling ₹1,500 crore under consortium lending, with ₹14.7 billion of this amount (related to seven accounts) under resolution with the National Company Law Tribunal (NCLT).

Looking ahead, the brokerage expects HUDCO's earnings to grow at an annual growth rate of 22.7% over FY24-FY26, supported by a 23.2% growth in assets under management (AUM), a 20 basis point improvement in net interest margin, stable operating expenses, and near-zero credit costs.

Price Action: HUDCO’s share price was up 0.30% to trade at ₹288.85 shortly after market open on Friday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.