Invest in a large-cap stock now for the potential to earn up to a 20% return
Invest in a large-cap stock: The housing finance sector in India has experienced remarkable growth, fueled by the thriving real estate market, increasing demand for homeownership, and government initiatives such as affordable housing schemes. Major players in this sector, including Bajaj Housing Finance, LIC Housing Finance, HDFC, and PNB Housing Finance, provide home loans and financing solutions for real estate purchases.
This sector benefits from the growing middle-class population, urbanization, and low interest rates, making home loans more accessible. With the government’s emphasis on affordable housing and infrastructure development, the growth potential for housing finance companies remains robust.
The continuous expansion of the real estate sector and rising disposable incomes are projected to sustain the demand for home loans, offering ample opportunities for these companies to grow and innovate.
Share Price:
As of January 28, 2025, the shares of Bajaj Housing Finance Limited are trading at Rs. 108.49, up by 2.6% from its previous close of Rs. 105.74. The stock also reached an intraday high of Rs. 109.81.
HSBC’s Revised Rating and Price Target for Bajaj Housing Finance:
Following the company’s December quarter results, HSBC has maintained its “reduce” rating on Bajaj Housing Finance Ltd. The brokerage has adjusted its price target for the stock, reducing it to ₹90 from the previous target of ₹110. This revision indicates a further 15% downside, as the stock is currently trading below the previous target. Bajaj Housing Finance has experienced a significant correction, declining by 44% from its post-listing high of ₹188, raising concerns about the company’s future stock performance.
Financial Performance in the December Quarter
Bajaj Housing Finance reported impressive results for the December quarter, with a 25% year-on-year increase in Net Interest Income (NII) to ₹806 crore. The company also saw a 25% rise in net profit, reaching ₹548 crore compared to ₹437 crore in the same quarter last year.
Despite these positive figures, HSBC has expressed concerns about Bajaj Housing Finance’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 anticipates a slowdown in Bajaj Housing Finance’s Earnings Per Share (EPS) growth in 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%. With these factors in mind, HSBC remains cautious about the stock and predicts a continued decline in its market value.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.