Jefferies Sees Up To 25% Upside In These Housing Finance Companies On Strong Loan Growth

By CNBCTV18.com  IST (Published)

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Housing loan growth accelerated to 15.5 percent in the April-June quarter from 13 percent in the previous quarter, said the brokerage house.

Global brokerage firm Jefferies stays positive on the stocks of housing finance companies owing to strong momentum in housing credit demand. In a recent note, Jefferies said that despite the rise in home loan rates and input cost inflation, housing credit demand has improved in the recent months, especially in tier 2 and tier 3 cities.

Housing loan growth accelerated to 15.5 percent in the April-June quarter from 13 percent in the previous quarter, said the brokerage house.

Housing loans by banks grew 15 percent and HFC loans increased 16 percent compared to last year, said the report, adding that housing loans at key affordable HFCs went up 23 percent YoY in the June quarter.

In the housing finance sector, Jefferies sees strong growth for LIC Housing Finance and Can Fin Homes.

The brokerage firm has a buy rating on the stocks of LIC Housing Finance with a target price of Rs 450, implying an upside of 6 percent. Strong demand in housing loan growth and the recent hike in home loan rates, according to the brokerage firm, might lead to higher profits, revenue, or growth and better net interest margin for LIC Housing Finance.

In one month, the stock has gained over 15 percent and is currently trading in the green, up by 0.8 percent from the previous close on the BSE.

For Can Fin Homes, Jefferies sees an upside of 14 percent aided by steady growth and strong asset quality.

Company  Current Price (Rs) Rating Target Price  (Rs) Upside (%)
HFC 
LIC HF 424 BUY 450 6%
Can Fin Homes  642 BUY 730 14%
AHFC
Aavas Financiers 2,286 BUY 2,850 25%
Aptus  361 BUY 350 -3%

Can Fin shares have gained over 11.6 percent in one month, giving strong results to the investors. At 12:01 am, shares of the housing finance company were trading at Rs 653, up by 0.9 percent from the previous close on the BSE.

“Among AHFCs, we prefer Aavas given its deep network and strong asset quality track record. We expect 20 percent earning per share CAGR and 3.5 percent return over assets over FY22-25 (estimated), which should support its premium valuation,” said Jefferies.

Shares of Aavas Financiers are trading at Rs 2,310, up by 0.8 percent from the previous close on the BSE.

The shares of these housing finance companies have outperformed the Nifty Bank index which has risen 5 percent in the last one month.

 

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