Motilal Oswal has given Buy recommendation for LIC Housing Finance recommended buy rating on the stock with a target price of Rs 420 in its researc with a target price of Rs. 420 in its research report issued on May 19, 2022
Motilal Oswal’s research report on LIC Housing Finance
LICHF reported a second consecutive quarter with no unpleasant surprises on margins, operating expenses or asset quality. Even though the disbursements (down 14% YoY in 4QFY22) and loan growth (up ~8% YoY) were a touch below our expectations, we highlight the following positives in 4QFY22: a) NIM improved ~23bp QoQ to ~2.65% aided by ~20bp improvement in CoF, and b) reduction of ~110bp QoQ in the 30+dpd that led to lower credit costs of ~30bp (v/s ~60bp QoQ). We believe that with its strong liability franchise, LICHF will be able to deliver healthy NIM of ~2.3% and RoA/RoE of 1.1%/11% in FY23E. However, the key risk is the asset quality in developer segment (GS3 of 32%), which remains the Achilles’ heel with very little visibility on resolutions.
The stock trades at 0.7x FY24E P/BV. We maintain our BUY rating with a TP of INR420 (premised on 0.8x FY24E BVPS).