Jefferies sees up to 25% upside in these housing finance companies on strong loan growth

0

By CNBCTV18.com IST (Released)

mini

Growth in home loans accelerated to 15.5% in the April-June quarter from 13% in the previous quarter, the brokerage said.

Global brokerage Jefferies remains positive on housing finance company stocks due to strong momentum in mortgage demand. In a recent note, Jefferies said that despite rising mortgage rates and input cost inflation, demand for mortgages has improved in recent months, especially in Tier 2 and Tier 3 cities.

Growth in home loans accelerated to 15.5% in the April-June quarter from 13% in the previous quarter, the brokerage said.

Housing loans from banks increased by 15% and HFC loans increased by 16% compared to last year, the report said, adding that housing loans in key affordable HFCs increased by 23% in year-on-year in the June quarter.

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

The brokerage firm has a buy rating on LIC Housing Finance shares with a target price of Rs 450, implying a 6% upside. According to the brokerage firm, the strong demand for housing loan growth and the recent rise in home loan rates could lead to increased profits, revenue or growth and a better net interest margin for LIC Housing Finance.

In a month, the stock has gained more than 15% and is currently trading in the green, up 0.8% from the previous close on BSE.

For Can Fin Homes, Jefferies is forecasting a 14% rise, helped by steady growth and strong asset quality.

Company Current price (Rs) Evaluation Target Price (Rs) Up (%)
HFCs
LIC HF 424 TO BUY 450 6%
Can Fin Homes 642 TO BUY 730 14%
AHFC
Financial Avails 2,286 TO BUY 2,850 25%
Aptus 361 TO BUY 350 -3%

Can Fin shares gained more than 11.6% in a month, delivering strong results for investors. As of 12:01 a.m., shares of the housing finance company were trading at Rs 653, up 0.9% from the previous close on BSE.

“Of AHFCs, we prefer Aavas given its extensive network and strong asset quality track record. We expect 20% CAGR earnings per share and 3.5% return on assets over the course of FY22-25 (estimated), which should support its premium valuation,” Jefferies said.

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

Shares of these housing finance companies have outperformed the Nifty Bank index which has risen 5% in the past month.

Share.

About Author

Comments are closed.