H U D C O (HUDCO)

FairStock Score: 62/100 — STEADY

Score breakdown: P/E: 2/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 1/1

Key Financials

Strengths

• Government promoter holding of 75% provides stability and a strong institutional backing for funding and mandates.
• P/E of 13.44 is not aggressive for a state-owned financial institution, and dividend yield of 2.22% gives some income support.
• ROE of 15.48% is respectable for a leveraged lender, and latest quarterly net profit of ₹713 Cr on sales of ₹3,431 Cr shows operational scale.
• Sales growth of 30.44% indicates strong demand for infrastructure financing and government-led capex activity.

Concerns

• Profit growth of 3.70% is far below sales growth of 30.44%, suggesting severe margin compression or rising provisions.
• Price of ₹204.60 is above the Graham number of ₹167.54 and trades at 2.28 times book value, leaving no margin of safety.
• Debt/Equity of 5.97 and negative free cash flow of ₹-32,542 Cr highlight high financial leverage and reliance on continued refinancing.
• Altman Z-Score of 0.71 and Piotroski F-Score of 5/9 indicate weak overall financial health, even after adjusting for HUDCO's lending nature.

AI Analysis

At ₹204.60, HUDCO is not a stock I would rush to buy. The business has one genuine quality: a 75% government promoter, which gives it a durable funding advantage and a stable role in infrastructure finance. That explains why I don't ignore it. But as Graham taught, a good business must be bought with margin of safety, and here the arithmetic fails that test. Book value is ₹89.75, yet the shares trade at 2.28 times book. The Graham number of ₹167.54 suggests I would only start getting interested after a meaningful decline from today's price. The P/E is 13.44, not absurd, but earnings growth of only 3.70% makes the PEG 1.95, so I am paying a premium for weak profit growth. Top-line grew 30.44%, yet profit barely moved. That tells me HUDCO is expanding loan volume without commensurate profitability — maybe provisioning, cost, or pricing pressure is eating the difference. ROE of 15.48% is respectable, but D/E of 5.97 makes me cautious; leverage is a lender's raw material, but it also means any asset-quality shock hits equity hard. The Altman Z-score of 0.71 would concern me in any ordinary business, although I know financial firms need a different lens. Free cash flow of negative ₹32,542 crore is a red flag I cannot ignore, even if part of it reflects lending activity. The 2.22% dividend is nice, but it is not enough compensation for the risk. I would classify this as a slow grower, not a compounding machine. If the price fell below my Graham number and profit growth improved at a double-digit pace, I would revisit.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer