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Target: ₹660
CMP: ₹652.50
LIC Housing Finance saw a mixed quarter as NII missed PL expectation (PLe) by 12 per cent, which was offset by lower provisions at 20bps (PLe 61bps). NIM declined by 37 bps q-o-q due to lower interest on recoveries on account of softer collection efficiency led by seasonality and repricing pressure, especially on higher priced loans, due to competitive intensity.
LIC Housing Finance expects NIM to have bottomed out as share of higher yielding non-housing loans is targeted to improve in FY25 to 20 per cent from 13 per cent in FY24 and funding cost may ease. Management does not expect any further fall in NIM since share of higher yielding segments is targeted to increase in credit flow, while funding cost may ease up and ₹7,500 crore borrowings are likely to mature in Q2’25.
Double-digit loan growth guidance has been maintained for FY25.
However, considering the competitive intensity from banks, we are factoring a loan CAGR of 7% over FY24-26. The company aims to keep credit costs at 25-30bps for FY25.
Given RoA of 1.4-1.5 per cent, re-rating would hinge on better loan growth and stable earnings quality in terms of NII and provisions.
We maintain multiple at 1.0x on Mar’26 ABV and TP at ₹660. Retain ‘HOLD’.
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