LIC Housing Finance Q4 Results Review - Re-Rating Hinges On Higher Loan Growth: Prabhudas Lilladher

Prabhudas Lilladher Report

LIC Housing Finance Ltd. saw a good quarter. Positives were-

1. adjusted net interest margin beat our estimate by 10 basis points and

2. asset quality improved, as despite sharp fall in stage-III due to TWO, PCR improved QoQ led by additional management overlay of Rs 1 billion.

Aberrations which marred Q4 FY24 earnings were-

1. wage revision and gratuity,

2. publicity costs and

3. higher tax rate due to deferred tax liability.

While disbursals were muted in FY24 company guided to achieve double digit loan growth in FY25 (4.3% in FY24). LIC Housing Finance needs to consistently deliver on its credit guidance; due to competition from banks especially in prime housing, we are factoring 7% loan CAGR over FY24-26E.

Given return on asset of 1.5-1.6%, valuation at 1.0 times seems attractive although we see PAT CAGR of 2.6% over FY24-26E and re-rating would hinge on better loan growth and earnings quality.

We raise adjusted book value for FY25/26E by 7% each led by reduction in gross non-performing asset.

Maintaining multiple at 1.0x, as we roll forward to Mar’26 ABV, our target price increases to Rs 660 from Rs 540. Retain ‘Hold’.

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