A housing finance stock may be preparing to extend a rally that began in late March

A housing finance stock has rewarded investors with some of the best returns in the segment, and many analysts are bullish on the stock from a long-term perspective. LIC Housing Finance shares have rallied almost 46 per cent in a major turnaround from a 52-week low hit on March 28.  

Though several analysts are positive about the company's long-term growth prospects and stock momentum over the past few weeks, can the rally sustain?

net interest margin (NIM) improved by 28 basis points to 3.21 per cent compared with the year-ago period.

According to Zee Business research, LIC Housing Finance's quarterly net profit was estimated at Rs 1,100 crore and NII at Rs 1,930 crore, and NIM expected to contract by 20-30 basis points compared with the year-ago period. 

The company's loan assets under management registered growth of 8.1 per cent to Rs 2,76,440 crore. Read more on LIC Housing Finance Q1 results

Although analysts at HDFC Securities acknowledged the company's better-than-expected results owing to a second straight quarter of strong growth in its NIM owing to asset repricing and liquidity management, they highlighted tepid loan growth on the back of a sharp fall in disbursals. 

The housing finance company took a hit of 28.6 per cent in loan disbursements to Rs 10,856 crore in the June quarter.  

Meanwhile, its gross non-performing assets as a percentage of total loans came in at 4.98 per cent and net non-performing assets at 2.99 per cent. Zee Business analysts had pegged the numbers at 4.4 per cent and 2.4 per cent, respectively. 

"LICHF is likely to continue facing a trade-off between growth and margins in an elevated competitive intensity environment, while the margin gains are likely to reverse themselves through the rest of FY24," analysts at HDFC Securities wrote, as the brokerage raised its estimates for the company's earnings in the financial years ending March 2024 and March 2025 and maintained its 'reduce' rating for the stock with a target of Rs 395. 

After a record 2023-23, how the management views the road ahead 

The company's management is optimistic about stable growth in a positive economic environment in the financial year 2023-24 despite recent hikes in benchmark interest rates amid worsening inflation. 

In its annual report for the year ended March 2023, the company said it remains "well-engrained in the middle-income end-user segment which is positioned to benefit from the changing demographic dividend due to the increasing consumption and purchasing power of the customer in India".

It also exuded confidence about registering growth in disbursements and improving its net interest margin, with a special emphasis on affordable housing. 

LIC Housing Finance sees its loan book expanding by 10-12 per cent over the levels achieved in the financial year 2022-23.

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