LIC Housing Finance shares are in focus following mixed Q3FY25 results, with Jefferies and CLSA maintaining optimistic outlooks, while Morgan Stanley (MS) remains cautious. The stock, currently trading at ₹600, could see an upside of up to 32% based on Jefferies’ projections.
Jefferies has reaffirmed its Buy rating with a target price of ₹795, suggesting a 32% upside from the current levels. The brokerage highlighted that Q3 PAT came in at ₹14.3 billion, marking a 23% year-on-year growth and coming in 4% ahead of estimates. While net interest income (NII) was slightly lower, this was offset by lower provisioning. Assets under management (AUM) grew by 6.4% YoY and 2% QoQ, although disbursements fell 14% QoQ due to state-specific issues. Despite the decline in disbursements, NIMs remained stable quarter-on-quarter. However, portfolio spreads contracted by 9 basis points QoQ, driven by a 4 bps decline in portfolio yield and a 5 bps increase in the cost of funds (CoF).
CLSA has maintained an Outperform rating with a target price of ₹720, implying a 20% upside. The brokerage noted that both NII and pre-provision operating profit (PPOP) were largely in line with expectations, while negative credit costs contributed to a 15% beat on net profit estimates. CLSA pointed out that a lower provision coverage ratio (PCR) led to these negative credit costs, and the probable sale of a GNPA asset to an asset reconstruction company (ARC) resulted in recoveries, with further details expected in the company’s earnings call. The gross stage 3 (GS3) ratio is now under 3%, marking a 2 percentage point decline over the past two years. However, loan growth remains tepid, with weak disbursals in both individual home loans and builder loans. The loan against property (LAP) share in the disbursal mix has now reached the mid-teens.
In contrast, Morgan Stanley (MS) remains cautious, maintaining an Underweight rating with a target price of ₹550, indicating a downside of 8% from current levels. The brokerage highlighted that NII missed estimates by 2%, driven by a 1 basis point QoQ contraction in NIMs and a 1% miss in the loan book compared to expectations. Although other income grew 34% QoQ, leading total income to beat estimates by 1%, PPOP missed estimates by 2% due to a 15% QoQ increase in operating costs. However, PAT beat estimates by 10% thanks to credit cost reversals. MS remains concerned about the rising operating expenses and subdued loan growth.
With Jefferies and CLSA projecting significant upside based on improving asset quality and stable margins, LIC Housing Finance appears to be on a steady growth trajectory. However, Morgan Stanley’s concerns about loan growth and rising costs highlight the challenges that could temper near-term gains.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making any investment decisions.)
