June 8, 2018 / 4:59 AM / 9 months ago

BUZZ-India housing finance stocks correct on margin concerns - Jefferies

** Housing finance companies’ share prices have been correcting on margin concerns due to rising bond yields - Jefferies

** Shares of PNB Housing Finance Ltd post weekly fall in last four weeks, while Indiabulls Housing Finance Ltd posted losses in 2 out of the last 4 weeks; both stocks are set to decline this week

** Housing Development Finance Corp Ltd posts weekly losses in two out of four weeks, but looks set to gain this week

** LIC Housing Finance Ltd and Dewan Housing Finance Corp Ltd declined in 3 out of 4 weeks, but are on track to gain this week

** With incremental spreads at lows, valuation multiples have likely bottomed, but stabilisation of bond yields and improvement in incremental spreads will be required to drive meaningful re-rating - Jefferies

** With the recent repo rate hike, brokerage expects housing finance firms to raise their lending rates, but they would continue to lag funding cost increase

** Jefferies prefers PNBH as strong loan growth should offset modest spread compression and drive earnings growth; rates stock at “buy”, price target at 1,700 rupees

** Spreads are likely bottoming out at LICH and valuations appear attractive, but Jefferies retains “hold” given limited near-term triggers

** Up to Thursday’s close, PNBH had fallen 14.2 pct while LICH dropped 12.5 pct this year

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