Buy LIC Housing Finance; target of Rs 650 Prabhudas Lilladher

Prabhudas Lilladher's research report on LIC Housing Finance

As growth challenges persist, we lower the multiple to 0.9x from 1.0x on Sep’26 ABV, while we upgrade to ‘BUY’ from ‘HOLD’ as asset quality risks have largely abated. LICHF saw a mixed quarter as disbursals were weak, but asset quality was better. NII/NIM were in-line and AuM growth broadly met PLe at 6.4% YoY; weak disbursals were offset by lower repayments. Credit flow was impacted due to issues in Bengaluru and Hyderabad markets; company expects volumes to normalize in these markets in Q4FY25. While LICHF is aiming for double-digit growth in FY26E, execution remains a key monitorable owing to competition from banks; we see AUM CAGR of 7.5% over FY25-27E. Asset quality continues to surprise positively; reported impairment charge was -Rs440mn and adjusting for ARC sale of Rs2.5bn, it was Rs2.06bn, entirely attributable to management overlay, which was a positive.

Outlook

We lower provisions for FY25/26/27E by 9-11bps, which would lead to PAT upgrade of avg 5.6% over FY24-27E. Further, we lower TP to Rs650 from Rs675. Upgrade to ‘BUY’.

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