After the Debt Market Chaos. Morgan Stanley has done a Stree Test on the Top NBFCs in India and in a report titled India NBFCs: All about Debt Mutual Funds and Interplay with NBFCs has released the Stock / Share Target Prices of the Top NBFCs as under.
HDFC - Rs2,270: sum of the parts, probability-weighted (bull 5%, base 75%, bear 20% - skew reflects challenging conditions for macro economy and NBFCs / HFCs and remote possibility of sharp recovery, in MS' view). Core business: base case target P/B of 2.5x on core Mar-2022 BVPS. Derived from Gordon Growth Formula (cost of equity 12.5%, ROE ~16%, growth ~10%).
M&M Financial Services - Rs285: sum of the parts, probability-weighted (bull 5%, base 55%, bear 40% - skew reflects challenges in macro climate and for NBFCs/HFCs, remote possibility of sharp recovery, in our view). Core auto finance & housing: three-phase RI model (five-year high-growth period, 10- year maturity period, terminal period. Cost of equity 12.5%, terminal growth rate 6%.
