Nomura has maintained its ‘Buy’ rating on LIC Housing Finance (LIC HFL) while cutting the target price to Rs 700 from Rs 795, following a mixed performance in Q3. The company reported a PAT of Rs 14.3 billion, marking a 23% YoY increase and coming in 4% ahead of estimates, as a slight miss in net interest income (NII) was offset by lower provisions.
However, AUM growth remained muted, with state-specific issues affecting disbursements. While the net interest margin (NIM) was stable QoQ, Nomura anticipates potential pressure on margins if interest rates are cut in the coming quarters. On the positive side, asset quality remained stable, with LIC HFL benefiting from a provision release due to the resolution of a stressed account.
Nomura expects muted EPS CAGR and projects a 13-14% ROE over FY25-27, but highlights that current valuations, at 0.8x FY26e BV, seem reasonable. Despite challenges in loan growth, LIC HFL’s stable asset quality and improved provisioning offer a buffer against macroeconomic uncertainties.
