Sharekhan, the brokerage firm, in its research report recommended a buy rating on LIC Housing Finance with a target price of Rs 505. The brokerage is bullish on the stock as the company reported better-than-expected operating performance led by lower credit costs in Q4FY22.
The Current Market Price of LIC Housing Finance Ltd as on 23 May 2022 is Rs 371.90, opened after gaining 0.54%. Given the CMP, and the target price, the stocks have 35.79% potential gains. However, in the last 1 year, the share price of the stocks has fallen. However, it has shown good gains in the last 1 week as it grew more than 11%. The stock touched the 52 week low of 321 this year on March 07, 2022. Whereas, it touched the 52 week the high level of Rs 542.45 on 11 June 2021.
LIC Housing Finance Ltd (LICHF) clocked a PAT of Rs. 1,119 crore, up 180% y-o-y and ~46% q-o-q, aided by lower credit costs in Q4FY22. For FY22, however, PAT declined by 16% y-o-y to Rs. 2,287 crore. Provisions stood at Rs. 117 crore versus Rs. 356 crore in Q3FY22. NII beat ours and the street's expectations, at Rs. 1,637 crore, rising by ~9% y-o-y and ~13% q-o-q (versus our estimate of Rs. 1,498 crore). NIM was up by 22 bps q-o-q (and marginally down by 2 bps y-o-y). This was primarily driven by healthy disbursements (up by 9% q-o-q). Overall spreads improved by 29 bps to 1.93% in Q4FY22. Disbursements declined by 14% y-o-y and was up by 9% q-o-q to Rs. 18,887 crore, driven by growth in individual loans (up by ~8% q-o-q) and project loans (up by ~46% q-o-q). Loan book grew by 8% y-o-y and 3% q-o-q in Q4FY22. This was primarily led by individual loan book growth (up by ~10% y-o-y and ~4% q-o-q). While project loans declined by ~19% y-o-y and ~8% q-o-q. Company's asset quality - Stage-3 assets improved by 40 bps q-o-q to 4.64% in Q4FY22. PCR stood at 43.1% versus 39.7% in Q3FY22.
Buy For Target Price of Rs. 505
The brokerage has said, "We find comfort in the company's stability with high return ratios and stable margins. LICHF is well-capitalised to cater to growth going ahead. With the improvement in the business environment after the intermittent disruptions by third wave, the company is well-poised to gain momentum in the individual loan book segment as well as the project loans where it intends to focus going ahead. Additionally, with an improving real estate cycle, we expect its disbursements to be higher going ahead with continued improvement in collection efficiency. Persistent concerns on its asset quality is seemed to be addressed by the company in the past two quarters with coverage of stage-3 assets at ~40%. We expect LICHF's AUMs to clock ~12% CAGR over FY23EFY24E. At the CMP, the stock trades at 0.7x/0.6x its FY2023E/FY2024E ABV. We maintain our Buy rating on the LICHF with a revised price target of Rs. 505."
In addition, commenting on the risks, the brokerage has said, "Increased delinquencies in the developer book may impact asset quality and affect profitability."
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