The housing finance sector in India has seen significant growth, driven by the booming real estate market, rising homeownership demand, and favorable government initiatives like affordable housing schemes. Key players in this sector include Bajaj Housing Finance, LIC Housing Finance, HDFC, and PNB Housing Finance, all of which offer home loans and financing solutions for real estate purchases.
The sector benefits from the increasing middle-class population, urbanization, and low interest rates, making home loans more accessible. With the government’s focus on affordable housing and infrastructure development, the growth prospects for housing finance companies remain strong.
The ongoing expansion of the real estate sector and rising disposable incomes are expected to fuel continued demand for home loans, providing ample opportunities for these companies to expand and innovate.
Share Price
The shares of Bajaj Housing Finance Limited are currently trading at Rs. 108.49 up by 2.6% from its previous close of Rs. 105.74 as of January 28, 2025. The stock also touched an intraday high of Rs. 109.81.
HSBC’s Revised Rating and Price Target for Bajaj Housing Finance
HSBC has maintained its “reduce” rating on Bajaj Housing Finance Ltd. after the company’s December quarter results. The brokerage has revised its price target for the stock, lowering it to ₹90 from an earlier target of ₹110. This revision suggests a further 15% downside, as the stock is already trading below the previous target. Bajaj Housing Finance has seen a significant correction, down 44% from its post-listing high of ₹188, raising concerns about the company’s future stock performance.
Financial Performance in the December Quarter
In its December quarter results, Bajaj Housing Finance reported a 25% year-on-year increase in Net Interest Income (NII), reaching ₹806 crore, along with a similar 25% rise in net profit, which stood at ₹548 crore from 437 crore in the corresponding quarter.
Despite these positive figures, HSBC expressed concerns over the company’s growth potential, particularly focusing on its Assets Under Management (AUM) growth. The company’s Gross NPA ratio remained stable at 0.29%, and its Net Interest Margin (NIM) held steady at 4%, compared to 4.1% in the previous quarter and year.
Slower EPS Growth Outlook
HSBC expects the growth in Bajaj Housing Finance’s Earnings Per Share (EPS) to slow down over the coming years due to pressure on AUM growth, margin compression, and the normalization of credit costs. As a result, the brokerage has revised its EPS estimates for FY
2025-2027 down by 3% to 4%. Given these factors, HSBC remains cautious about the stock, forecasting a continued decline in its market value.
Written By: Dipangshu Kundu
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