Most analysts positive on LIC Housing post Q3; eye NIM, rate cut trends

Housing finance company LIC Housing Finance has seen mixed but largely positive reactions from analysts following its Q3FY25 results. 

 

While the company reported subdued loan and disbursement growth, largely impacted by regional challenges in Bangalore and Hyderabad, analysts have focused on the positives, including healthy asset quality improvements and provision reversals that boosted earnings. 

 

Brokerages such as Motilal Oswal, Jefferies, and Nomura have maintained or raised their buy ratings, citing stable NIMs, strong retail mortgage moats, and a strategic shift towards affordable housing. However, concerns over muted loan growth and potential NIM volatility remain.

 

On the bourses, LIC Housing Finance soared as much as 2.85 per cent to hit an intraday high of Rs 573.65 per share. However, at 9:20 PM, LIC Housing Finance were off day’s high and were trading 2.47 per cent lower at Rs 571.45 apiece. In comparison, BSE Sensex was trading 0.58 per cent higher at 77,636.93.

 

Meanwhile, here’s what top brokerages said about LIC Housing Finance post Q3: 

 

Nomura | Buy | Target: Rs 735 (Rs 700 earlier)

 

LIC Housing Finance reported a profit after tax (PAT) of Rs 1,430 crore for Q3FY25, a 23 per cent Y-o-Y and 8 per cent Q-o-Q increase, driven by provision write-backs (Rs 250 crore), analysts at Nomura said. Net interest income (NII) and pre-provisioning operating profit (PPOP) were 3 per cent and 4 per cent below estimates, respectively, due to soft asset under management (AUM) growth and lower net interest margins (NIMs). 

 

The company has shifted its focus from growth to margins and is scaling up its affordable housing segment, which it expects to make up 6-7 per cent of its loan book in 2-3 years. Despite recent stock corrections (about 14 per cent), Nomura maintained a ‘Buy’ rating and raised the target price to Rs 735 (from Rs 700).

 

HSBC | Upgrades to Hold | Target (Raised): Rs 600

 

According to reports, HSBC analysts said LIC Housing Finance continued to lose market share and faced pricing challenges but has managed to lower credit costs, offsetting some of the earnings pressure. Despite this, HSBC has upgraded its EPS estimates on a better asset quality outlook. Given the correction in valuations, HSBC has raised its target price to Rs 600, and upgraded to ‘Hold’ rating.

 

Motilal Oswal | Buy | Target (Reduced): Rs 690 

 

LIC Housing Finance reported subdued loan and disbursement growth, primarily due to lost business volumes in Bangalore and Hyderabad. However, NIMs remained stable, and asset quality showed a healthy improvement. Provision write-backs contributed to earnings growth. 

 

Despite strong retail mortgage moats and its ability to pass on higher borrowing costs, LIC Housing Finance’s valuation of about 0.7x FY27E P/BV reflects challenges in achieving stronger loan growth. Thus, Motilal Oswal estimated return on assets/return on equity (RoA/RoE) of 1.7 per cent/14 per cent in FY27 and maintained a ‘Buy’ rating with a target price of Rs 690. Key risks, analysts believe, include weak loan growth and NIM volatility.

 

Nuvama | Hold | Target: Rs 630 (Rs 705 earlier)

 

The company Q3 PAT exceeded consensus estimates by 7 per cent, primarily due to a provision reversal of Rs 260 crore on a fully provided NPL sold to an ARC. Loan growth was weak at 2 per cent Q-o-Q, and disbursals dropped 6 per cent, impacted by issues in Karnataka and Hyderabad. NIM remained stable at 2.7 per cent. Although there was provision reversal, net provisioning reversal was lower at Rs 44 crore. 

 

The Management expects AUM and NIM improvements, but these are expected to materialise in two–three years. Given muted near-term growth and expectations of rate cuts, Nuvama retained ‘Hold’ with a reduced target of Rs 630 (from Rs 705).

 

Jefferies | Buy | Target: Rs 700 (Rs 795 earlier) 

 

According to reports, Jefferies highlighted that the company’s margin remained stable Q-o-Q, but headwinds from potential rate cuts are a concern. Provision reversal, primarily due to wholesale account resolution, led to a positive earnings surprise. 

 

Jefferies expects a 4 per cent EPS CAGR and RoE of 13-14 per cent over FY25-27. However, a meaningful rating upgrade requires better loan growth and NIM improvement. Thus, Jefferies lowered its target to Rs 700 (from Rs 795), maintaining a ‘Buy’ rating.