LIC Housing Finance: Target Price of Rs 575 Set by Prabhudas Lilladher

LIC Housing Finance Sees Muted Loan Book Growth Amid Higher Repayments

In its latest research report, Prabhudas Lilladher has provided an update on LIC Housing Finance's performance. The company's disbursements in Q4 saw a notable increase of 9.7% year-over-year (YoY), a trend that is expected to continue. However, higher repayments resulted in muted loan book growth of 4.4% YoY, reaching Rs3,161.7 billion.

The research report highlights that LIC Housing Finance's asset under management (AUM) growth is expected to recover in the coming years, with estimates suggesting a growth rate of 10% in FY27 and 9% in FY28E. This recovery is attributed to several factors, including higher retail disbursals, increased third-party sourcing and co-lending, the introduction of a dedicated affordable housing vertical, and the addition of ~200 new frontline hires.

Key Financial Projections

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According to the report, the company's cost of funds (CoF) is expected to inch up in FY27, with net interest margin (NIM) moderating by 6bps and 18bps in FY27 and FY28E, respectively. The possibility of a repo-rate hike is likely to exert some pressure on the company's financials. On the other hand, headline asset quality saw an improvement, with credit costs expected to be around 17bps and 20bps in FY27 and FY28E, respectively.

Forecast and Recommendation

Considering the pick-up in growth amid the possibility of a rate hike, Prabhudas Lilladher has tweaked its FY27 and FY28E estimates. The research firm maintains a price-to-book value (P/ABV) multiple of 0.7x on March 28, 2028, resulting in a target price of Rs575. The recommendation for LIC Housing Finance remains 'Hold'.

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