Avendus Capital has maintained a Reduce rating on LIC Housing Finance with a revised target price of ₹606, up from ₹584 earlier. The brokerage expects muted growth and margin pressure to weigh on the company’s near-term performance.
Avendus projects loan growth of just 7% in FY26, primarily driven by subdued disbursement momentum. Further, it sees net interest margins declining to 2.6%, impacted by policy rate cuts. On the cost front, the brokerage doesn’t foresee any operating leverage benefit, with operating expenses expected to stay flat at ~50 basis points of assets.
On asset quality, Gross Stage-3 assets are projected to decline to 2.2% in FY26 from 2.5% in FY25, aided by improved recoveries. However, return ratios are expected to remain modest, with RoA and RoE at 1.7% and 14.2% respectively.
Given the backdrop of moderate loan growth and margin compression, Avendus values LIC Housing Finance at 0.7x Jun-27E book, and expects flat earnings CAGR and 13% book value CAGR over FY25–FY27.
Disclaimer: The views and target price mentioned in this article are derived from the brokerage report of Avendus Capital. They do not represent the opinions or recommendations of this publication. Investors are advised to consult their financial advisors before making any investment decisions.
