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ICICI Securities Picks 4 Stocks To Buy, Add From Housing Finance Sector For 50% Return

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ICICI Securities has picked 4 stocks to buy and add from the housing finance sector. These stocks are HDFC (Buy), LIC Housing Finance (Add), Aavas Financiers (Buy), and Home First Finance (Buy). If you invest in these stocks now, you will get maximum return of 50%. Check key takeaways below:

 
Name of companyReturn
Aavas Financiers50%
Home First Finance38%
HDFC20%
LIC Housing FinanceAdd Rating

1. Buy Aavas Financiers

1. Buy Aavas Financiers

The brokerage has maintained buy call for Aavas Financiers with a target price of Rs 2845 apiece. The current market price of the stock is Rs 1899 apiece. If you buy Aavas Financiers today, you will get potential return of 50%. The company has market capitalisation of Rs 15,011 crore.

The stock has given return of 11% in last 3-years and declined 32% in last 1-year. It has declined 15% in last 3-months.

Aavas Financiers' (Aavas) Q2FY23 earnings beat our estimates primarily due to higher assignment income and lower than anticipated credit cost, said ICICI Securities.

According to the analyst, "Overall, we are looking at disbursement CAGR of >30% and AUM CAGR of >25% for FY22-FY24E, moderate decline in NIMs, aiding the company to deliver ~3.6% / 3.7% RoA and ~14% / 15% RoE by FY23E / FY24E. Maintain BUY with the target price unchanged at Rs2,845 (6.0x FY24E BV)."

Key risks are: 1) elevated opex weighing on RoA improvement, 2) competitive pressure on yields.

2. Buy Home First Finance
 

2. Buy Home First Finance

ICICI Securities has assigned buy call to Home First Finance with a target price of Rs 995 apiece. The current market price of the stock is Rs 719 apiece with a market capitalisation of Rs 6314 crore.

The stock has declined 16% in last 1-year. If you buy Home First Finance Company India Ltd today, you will get potential return of 38%.

According to ICICI Securities, "The business momentum seen in H1FY23 improves visibility on HomeFirst being able to register >35% AUM CAGR over FY22-FY4E with stable-to-moderate decline in spreads and contained credit cost. We expect the company to deliver RoAs of ~3.8-3.9% and RoEs of ~13-14% until FY24E. Maintain BUY with an unchanged target price of Rs995 (4.25x FY24E book)."

Key risks: i) Sourcing as well as collections managed by front-end team, and ii) elevated operating cost.

3. Buy HDFC

3. Buy HDFC

The brokerage has assigned buy rating to the stock with a target price of Rs 3205 apiece. The current market price of the stock is Rs 2678 with an intraday dip of 0.44%.

The company has a market capitalisation of Rs 4,87,226.37 crore. The stock has given return of 56% in last 5-years and declined 6% in last 1-year. Buy HDFC Ltd today to get a return of 20%.

According to ICICI Securities, "We expect NII growth to further gain traction in the coming quarters with repricing benefit likely to be reaped in its entirety. Maintain BUY with an SoTP target price of Rs3,205 (assigning a multiple of 2.7x to FY24E core mortgage book)." Key risks are i) lagged NIM improvement; ii) modest non-individual growth transitioning into merger.

4. Add LIC Housing Finance

4. Add LIC Housing Finance

ICICI Securities has maintained "add" call to the stock with a target price of Rs 415 apiece. The current market price of LIC Housing Finance is Rs 382 apiece with a market capitalisation of Rs 21,059 crore.

The stock gained 3% intraday. The stock has declined 36% in last 5-years and gained nearly 3% in last 1-week.

According to ICICI Securities, "The stock is trading at an inexpensive valuation of 0.7x FY24E P/B, but that is due to volatility and lack of consistency/visibility in earnings. The overhang continues and will cap rerating beyond 0.8x FY24E. We therefore revise our target price to Rs415 (earlier: Rs490 at 0.9x FY24E book). Downgrade to ADD (from Buy)."

Key risks are: i) lagged NIM improvement; ii) higher stress flow from restructured pool.

LIC Housing Finance's (LICHF) erratic NIM behaviour across quarters makes it difficult to forecast its NIM trajectory with a reasonable degree of confidence, said the analyst.

Disclaimer

Disclaimer

The stocks have been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

Story first published: Friday, November 25, 2022, 15:03 [IST]
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