LIC Housing Finance Witnesses Surge in Share Price, Expected to Sustain Momentum

LIC Housing Finance Witnesses Surge in Share Price, Expected to Sustain Momentum

VoM News Desk | December 11, 2023 | 03:44 PM IST | Breaking News | Follow on Google News

LIC Housing Finance Witnesses Surge in Share Price, Expected to Sustain Momentum /Mint

LIC Housing Finance Witnesses Surge in Share Price, Expected to Sustain Momentum

LIC Housing Finance, a leading housing finance company in India, has observed a substantial 63% return over the last nine months, marking a notable surge in its shares.

The stock gained momentum in March, exhibiting a strong recovery after a slow start in the initial months of CY23. In the latest trading session, it climbed 5% to reach a new 52-week high of ₹544 per share.

Looking ahead, domestic brokerage firm Sharekhan predicts a sustained upward trajectory for the stock. Emphasizing the stock’s appealing valuation with a price-to-book value (P/BV) ratio of 0.7/0.6x for FY25E/FY26E estimates, Sharekhan maintains a ‘buy’ rating, revising the target price to ₹555 per share.

Sharekhan anticipates LIC Housing Finance to achieve double-digit Asset Under Management (AUM) growth, driven by an upward trend in disbursements.

The company’s management foresees continued momentum in disbursements, expecting a rise in the sanction to disbursements ratio beyond the current 80%.

Having completed IT-related transformations that disrupted disbursements in Q1FY24, Sharekhan projects an 11% CAGR in AUM over FY23–26E, driven primarily by strong demand in the individual home loan segment.

Despite an expected normalization of Net Interest Margin (NIM) at 2.8% over FY24–26E (higher than the historical range of 2.3-2.5%), LIC Housing Finance managed to maintain NIM over 3.0% during H1FY24.

Sharekhan estimates a 16% CAGR in Pre-Provision Operating Profit (PPoP) over FY23–26E, compared to 8.2% over FY21–23E.

Highlighting improved asset quality, the company exhibited decreased Gross Stage 3 (GS-3) ratio and contained stress levels in GS-1/GS-2. Sharekhan notes a rise in the better-quality individual home loan portfolio, contributing to a contained credit cost at 0.5% over FY23–26E.

In the September-ending quarter, LIC Housing Finance reported a significant increase in net profit to ₹1,188 crore, nearly four times higher than the same period last year. Interest income also surged to ₹6,707 crore from ₹5,049 crore a year ago.

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