Morgan Stanley upgrades LIC Housing Finance to overweight, stock gains 2%

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26 Aug, 2025 12:21

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Betting on gains for housing finance companies (HFCs) from government initiatives, LIC Housing Finance saw investor interest on Wednesday as the stock soared over 2 percent intraday. A ratings upgrade by a global brokerage firm also aided the rally.

Morgan Stanley upgraded the stock to weight from equal weight, with an increased target of Rs 750 from Rs 560.

“Following the extension of the credit-linked subsidy scheme to the middle-income segment, HFCs, real estate companies, and investors appear extremely bullish on the medium-term growth prospects,” analysts at the firm wrote in a report.

Even though actual delivery of this remains to be seen, but investors’ bullishness may not reduce, it feels. Investors could pick stops with optionality that will participate in the upside, but not price in too much growth.

In that framework, LIC Housing Finance looks like a bigger direct beneficiary than other HFC stocks. “It has a much higher share of home loans, a large presence in the scalable salaried segment, lower average ticket size, a pan India presence, and, most importantly, higher profitability in the core home loan book,” the report added.

Based on these observations, Morgan Stanley raised earnings per share (EPS) estimates and target price due to strong revenues and leading indicators in the fourth quarter of last fiscal. “Key driver is higher developer and LAP loan growth, which will also help partially offset home loan re-pricing pressures,” the report stated.

Its earlier rating of equal weight was based on concerns around net interest margins, which continues to remain.

The stock has gained over 10 percent in the past one month, while its three-day gain stood at nearly 5 percent. At 14:22 hrs, the stock was quoting at Rs 673.95, up Rs 0.85, or 0.13 percent on the BSE. It touched a 52-week high of Rs 688.00.