LIC Housing Finance, a prominent player in the Indian housing finance sector, reported robust earnings for the first quarter of the fiscal year 2024. The company’s net profit surged by an impressive 43 percent, reaching Rs 1,324 crore, driven by strong demand for housing loans in the country.
Robust Growth in Net Profit and Net Interest Income (NII)
LIC Housing Finance started the fiscal year on a high note, with a remarkable 43 percent increase in standalone net profit during the first quarter. The company’s net profit soared to Rs 1,324 crore, fueled by robust demand for housing loans across India. This significant growth in net profit showcases LIC Housing Finance’s ability to cater to the increasing aspirations of the expanding middle class, despite challenges posed by higher interest rates and home prices.
The company’s net interest income (NII) also witnessed a substantial surge of 38 percent during the quarter under review. The NII amounted to Rs 2,252 crore, a significant jump from Rs 1,628 crore in the previous fiscal. This remarkable growth in NII reflects LIC Housing Finance’s strong performance in managing its loan portfolio and generating interest income, further contributing to its impressive financial performance in the June quarter.
NPA Figures and Cost Management
While LIC Housing Finance demonstrated robust financial growth, it faced some challenges related to asset quality. As of June 30, 2024, the company’s stage 3 exposure at default (gross non-performing asset) stood at 4.98 percent, slightly higher than the 4.96 percent reported a year ago. However, the company managed to improve its net NPA, which decreased to 2.99 percent from 3.01 percent on-year. This indicates the company’s efforts in managing and reducing non-performing assets.
In terms of expenses, LIC Housing Finance witnessed a 23 percent increase in total expenses during the first quarter. Finance costs escalated by 23 percent to Rs 4,494 crore, while interest income rose by 28 percent to Rs 6,704 crore. Managing expenses and controlling finance costs will be crucial for the company to maintain its profitability and ensure sustainable growth in the competitive market.
Housing Demand and Brokerage Views
The demand for housing in India has seen an uptick in the post-pandemic period, as an expanding middle class continues to invest in real estate despite higher interest rates and home prices. LIC Housing Finance, being a significant player in the housing finance sector, has benefitted from this trend, leading to increased loan disbursements and higher interest income.
Brokerage firms have expressed varied views on the company’s stock. Morgan Stanley has assigned an ‘underweight’ rating to LIC Housing Finance stock with a target price of Rs 320 per share, while YES Securities is bullish on the stock and has recommended a ‘buy’ rating with a target price of Rs 470 in its May 17 research report. Similarly, Sharekhan also has a positive outlook, giving the stock a ‘buy’ rating with a target price of Rs 435.
Stock Performance
Over the last six months, LIC Housing Finance has provided a return of 3.05 percent. While this is a positive return, it has underperformed the benchmark Nifty50 index, which recorded a return of 9.10 percent over the same period. The company’s stock performance is closely monitored by investors, given its strong performance in the June quarter and positive views from brokerage houses.
Conclusion
LIC Housing Finance’s Q1 earnings report showcases its ability to capitalize on the increasing demand for housing loans in India. The surge in net profit and net interest income demonstrates the company’s effective loan portfolio management. Despite some challenges related to asset quality and increasing expenses, the company remains optimistic about its growth prospects, given the prevailing housing demand and positive outlook from brokerage firms. As investors continue to evaluate its performance and potential, LIC Housing Finance remains a key player in India’s vibrant housing finance sector.
