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LIC Housing Finance shares zoom 15% on strong Q3; should you buy, sell or hold?

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Shares of mortgage lender LIC Housing Finance zoomed nearly 15 percent on Friday after the firm reported a 6 percent increase in profit after tax for the quarter ended December 2021 aided by higher collections and a drop in provisions.

LIC Housing Finance shares zoom 15% on strong Q3; should you buy, sell or hold?
Shares of mortgage lender LIC Housing Finance zoomed nearly 15 percent on Friday after the firm reported a 6 percent increase in profit after tax for the quarter ended December 2021 aided by higher collections and a drop in provisions.
The company reported a profit after tax of Rs 727.04 crore in the same period of the previous fiscal.
The shares touched Rs 396.65, up 14.85 percent on the BSE. On the NSE, it rallied 12.59 percent to Rs 389.
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"The income levels were more or less maintained. Our collections were good during the three months of the quarter. Recovery also picked up across all the regions. Even the provisions were less in the quarter because of the provisions we had made earlier," the company's Managing Director and CEO Y Viswanatha Gowd said.
The lender reported better growth in the quarter due to higher disbursements during the festive season. Gowd also said with the easing of the pandemic, growth and asset quality metrics are expected to improve. Provisions during the quarter stood at Rs 355 crore as against Rs 665 crore made in the second quarter of this fiscal.
Brokerage firm Morgan Stanley said LIC Housing Finance’s Q3 profit was in-line given higher provisions towards new RBI norms. The pre-provision operating profit is at 15 percent – ahead of estimates, driven by strong net interest income.
The brokerage maintained its ‘underweight’ rating on the mortgage lender’s stock with a target price at Rs 345. Morgan Stanley also said that management commentary on asset quality and sustainability of net interest margin is awaited.
Jefferies maintains a 'buy' on the stock with a target price of Rs 510, implying a potential upside of 49 percent. The brokerage said that the loan growth was weaker than expectations due to a fall in project loans.
Profit was led by lower-than-expected opex and credit costs. Topline growth was healthy at 14 percent, led by loan growth of 11 percent and better NIM, Jefferies added.
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