Undervalued Stock: Is LIC Housing Finance Share Worth Buying?

Synopsis: Citi has maintained a Buy rating on LIC Housing Finance with a target of Rs 730, implying nearly 40% upside from current levels. The broker believes prolonged underperformance has compressed valuations, making the stock one of the cheapest in the housing finance space, with limited downside and potential re-rating.

The company, which is a housing finance company registered with the National Housing Bank (NHB) and is mainly engaged in financing the purchase/construction of residential flats/houses for individuals and project finance for developers, had its shares in focus after the company had received a target with a positive outlook from CITI.

With a market cap of Rs 29,000 crore, the shares of LIC Housing Finance Ltd gained 2 per cent in today’s trading session and reached a high of Rs 532.9. When compared to its previous day’s closing price of Rs 521.95, the shares are trading at a PE of 5.28 compared to its industry PE of 14.1.

CITI on LIC Housing Finance Ltd

The broking house, Citi, has given a Buy rating to LIC Housing Finance Limited with a target price of Rs 730, as the company’s valuations are attractive following a prolonged period of underperformance. The stock has fallen considerably in the last 3, 6, and 12 months, resulting in a sharp decline in valuations to 0.6x FY27E P/B and 5x FY27E P/E. According to Citi, the sharp correction in the stock has made LIC Housing Finance Limited one of the least valued and most underappreciated housing finance companies in the sector.

The broking house points out that the current market price implies conservative estimates of RoE of 11.5% and loan growth of 4% in the medium to long term. However, the management is actively working on a strategy revamp by enhancing distribution, increasing agent productivity, expanding direct sourcing and lead generation, exploring co-lending models. and entering the self-employed and affordable housing segments. If the management is able to deliver better results, there could be an upward revision in earnings estimates.

With the previous closing price of Rs 521.95, the target price of Rs 730 set by Citi translates into an upside of about 40%, which makes for a very attractive risk-reward ratio. The broking firm feels that the downside risks seem limited at present valuation levels, while any kind of improvement in growth momentum and return ratios could trigger a re-rating.

Financials

The revenue from operations for the company stood at Rs 7,209 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 7,070 crores, up by about 2 per cent YoY. However, the net profit stood at Rs 1,398 crore in Q3 FY26, down compared to the Rs 1,435 crore profit in Q3 FY25.

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