Thumbs up for Indiabulls Housing Finance post Q2 show

MUMBAI: Most brokerages have increased their price targets on Indiabulls Housing Finance (IHF) after the company surprised the Street with its September quarter results.

The company said consolidated net profit jumped 23% to Rs 686 crore in the quarter largely on account of 29% growth in assets under management, sharp fall in funding costs, easier norms and new avenues to raise funds through bonds.

Brokerages have raised the target price for IHF by 11-26%. The shares of IHF slipped 0.52% to close at Rs 867.50 on BSE on Tuesday.

“IHF’s improving asset and liability mix will continue to drive a re-rating,” said Adarsh Parasrampuria, analyst at Nomura. “Cyclically, rate environment remains favourable for IHF and ability of banks to compete on pricing is lower than last cycle (FY09-10).”

Nomura increased its target price to Rs 1,025. While raising the target price from Rs 870 to Rs 1,010, based on three times the Sep 2018 adjusted price to book, CLSA said that it will see a 22% CAGR in profit over FY16-19 with high profitability.

“IHF has leveraged the sharp fall in funding costs, easier norms and new avenues to raise funds through bonds, which cost 70 bps lower than the bank loans,” said Prakhar Sharma of CLSA. “This can help drive growth in home loans and also de-risk the loan mix and we see 22% profit CAGR over FY16-19.”

IHF stock has risen 18% so far this year, 3.1 times its FY17E book value. “We continue to expect Indiabulls delivering healthy growth rates with stable margins, benefiting from the falling rates environment,” said Sunil Tirumalai of Credit Suisse.