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Buy LIC Housing Finance; target of Rs 420: Motilal Oswal

Motilal Oswal is bullish on LIC Housing Finance recommended buy rating on the stock with a target price of Rs 420 in its research report dated May 19, 2022.

May 21, 2022 / 07:52 PM IST
 
 
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Motilal Oswal's research report on LIC Housing Finance


LICHF reported a second consecutive quarter with no unpleasant surprises on margins, operating expenses or asset quality. Even though the disbursements (down 14% YoY in 4QFY22) and loan growth (up ~8% YoY) were a touch below our expectations, we highlight the following positives in 4QFY22: a) NIM improved ~23bp QoQ to ~2.65% aided by ~20bp improvement in CoF, and b) reduction of ~110bp QoQ in the 30+dpd that led to lower credit costs of ~30bp (v/s ~60bp QoQ). We believe that with its strong liability franchise, LICHF will be able to deliver healthy NIM of ~2.3% and RoA/RoE of 1.1%/11% in FY23E. However, the key risk is the asset quality in developer segment (GS3 of 32%), which remains the Achilles’ heel with very little visibility on resolutions.



Outlook


The stock trades at 0.7x FY24E P/BV. We maintain our BUY rating with a TP of INR420 (premised on 0.8x FY24E BVPS).

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first published: May 21, 2022 07:52 pm
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