3 NBFC Stocks To Buy Following Their Robust Quarterly Results

Non Banking Finance Companies (NBFC) reported a mixed set of results, with some of the larger companies from the space reporting good numbers. Here are 3 NBFC stocks to buy according to the latest report from Sharekhan on the NBFC and insurance sector.

Mixed performance

According to Sharekhan, companies in its coverage witnessed mixed performance. "For housing finance companies, demand continued to remain robust with healthy pick up in housing loans. While wholesale disbursements are yet to reach pre-Covid levels. However, with broad-based economic recovery, disbursements across product segments were buoyant. Asset quality of companies were impacted by revised guidelines by RBI for NPA recognition but remained contained. With respect to vehicle financiers, asset quality was most impacted by the RBI's circular. However, here too disbursements continued the strong momentum. For diversified NBFCs, disbursements further gained momentum with improved asset quality," the brokerage has said.

Steady growth in Net Interest Margins

Housing Finance Companies and VF companies, according to Sharekhan reported net interest income (NII) growth of 3% y-o-y and 10% y-o-y, respectively.

Net Interest Margins seemed to be under pressure during the quarter, which increased by 0.2% q-o-q due to intense competition among players.

"We expect Net Interest Margins to be moderate on account of continued competition and cost of funds touching bottom. Asset quality saw significant deterioration due to recent revised guidelines by the Reserve Bank of India (RBI) of NPA recognition despite improvement in asset quality. Going ahead, asset quality of companies would be a key monitorable and credit costs there on. HDFC is likely to fare well on the asset-quality front. For MMFS, asset quality deteriorated the most with GNPA at 17% in Q3FY2022 and management has guided for NNPL of 6% by FY2022 to meet PCA requirements," the brokerage has said.

Stocks to buy from the NBFC space

Company name	Current market price	Target price
HDFC	Rs 2364	Rs 3589
Bajaj Finance	Rs 6995	Rs 9097
Cholamandalam	Rs 689	720

Sharekhan sees good potential gains in the stocks of HDFC and Bajaj Finance, which is much higher than Cholamandalam Investment.

Disclaimer

The stocks have been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses, especially as we are seeing volatile markets now. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. The author owns shares in HDFC Ltd, which is recommended by Sharekhan.