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Centrum Broking
GIC Housing (Buy)
CMP: ₹231.50
Target: ₹340
In our recent interaction with GIC Housing Finance, the management of the company pointed to strong growth traction following demand in its niche target segment of low-middle income group, primarily in metro / tier-I cities. 65 per cent of housing shortfall is in the economically weaker sections and thus bodes well for GICHF. This in addition to investment in infrastructure (has 56 branches and plans to add 8-9 branches every year), policy reforms in low-cost affordable housing and benign interest rate regime have aided the surge in loan portfolio.
The reason for the higher multiple is increased conviction from a) consistency in growth; b) thrust on improving liability profile; and c) asset quality containment. Sector dynamics and opportunity in the niche LMI segment continue to favour GICHF. This, in addition to renewed focus on liability profile, will help improve spreads and eventually return ratios in the longer run. With growth acceleration and improved profitability, we expect GICHF to follow the trend of higher multiple.
Key risk: Lower than expected loan growth.
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