Brokerages hiked their target prices on LIC Housing Finance after it reported a better-than-expected earnings show for the quarter ended December 31, 2024.
LIC Housing Finance's net profit stood at Rs 1,432 crore, which marks a 23.1 percent gain from Rs 1,163 crore in the corresponding quarter of the previous fiscal year. However, the net interest income (NII) came in at Rs 1,997.1 crore, falling 4.8 percent from Rs 2,097 crore in Q3 FY24.
Nomura wrote that the profit beat was largely driven by provision write-backs in the quarter,
amounting to Rs 250 crore. NII was three percent below the brokerage's estimates on account of soft AUM growth, lower NIMs and elevated opex. The company changed its stance from prioritizing growth to focusing on margins.
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Despite rate cuts, LIC Housing Finance expects to maintain margins driven by its foray into the affordable segment, a PLR hike of 10 basis points, a roll-back of assets to performing from non-performing; and accretion in the higher-yielding project loan portfolio.
The stock has corrected by ~14 percent over the past three months, while the frontline index Nifty 50 has slipped 3.5 percent, and is trading at benign valuations. As a result, Nomura hiked its target price on the firm to Rs 735 per share, up from Rs 700 earlier, while maintaining its "buy" rating. This implies an upside of 31 percent.
HSBC has upgraded LIC Housing Finance to "hold" and raised its target price to Rs 600 per share. The company continues to lose market share and faces pricing challenges, but lower credit costs are helping offset earnings pressure. HSBC has also upgraded its EPS estimates, citing a better asset quality outlook, while noting that current valuations have corrected significantly.
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