Motilal Oswal Recommends Buying This Finance Stock For 20% Upside

The brokerage firm Motilal Oswal recently recommended buying the stocks of LIC Housing Finance (LICHF) for 20% upside. About the stock, the firm mentioned, "Demand for Individual Home loans will remain robust in the medium term. This will feed into better disbursements in the Wholesale segment as well."

Target Price

The Current Market Price (CMP) of LIC Housing Finance (LICHF) is Rs. 383. Motilal Oswal has estimated a Target Price for the stock at Rs. 460. The company is expected to offer a 20% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 383
Target Price	Rs. 460
1 year return	20.00%

Company performance

LICHF reported a PAT of Rs. 7.67b (~60% beat) in 3QFY22, up ~6% YoY, driven by an all-round beat on NII (up 25% QoQ and 14% YoY; 12% beat), opex (down 21% QoQ; 3% lower than our estimate), and lower credit costs, which declined by 44% QoQ to Rs. 3.56b. There was a one-off impact of Rs. 1.35b on interest income in 2QFY22 due to the EIR/IRR impact on the restructured loan pool. Adjusted for this, NII was up 12% QoQ. NIM improved by ~42bp QoQ to ~2.42% in 3QFY22, while core spreads declined to 1.83% in 9M (from 1.96% in 1HFY22).

Comments by Motilal Oswal

Motilal Oswal stated, "Loan disbursements in Individual Home loans rose 6% YoY and 11% QoQ. However, non-Housing disbursements rose 50% QoQ and 43% YoY. The growth was healthy in Individual Home loans, up ~15.5% YoY and 4% QoQ. The overall loan book was up 10.5% YoY and 2.4% QoQ. Collection efficiency stood at 99% in Dec'21. We now estimate 11% loan/6% PAT CAGR over FY21-24E on a gradual. We upgrade our FY22E EPS estimate by 22% to factor in higher NII and lower credit costs. The stock's valuation provides a decent risk-to reward opportunity."

About the company

Incorporated in 1989, LIC Housing Finance Ltd (LICHFL) provides long term finance to individuals for the purchase or construction of house/flat for residential purposes, along with providing finance on existing property for business/ personal needs and also gives loans to professionals for purchase/construction of Clinics/Nursing Homes/ Diagnostic Centers/ Office Space and also for purchase of equipment. LICHFL served above 25 lakhs families, and they have more than Rs. 2 lakh crore loan book.

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Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.