LIC Housing Finance, undervalued stock with great upside potential !!

Let’s talk about LIC housing finance, company that when got public, the IPO was oversubscribed but later we saw stock was in pressure but it was always said that the company is undervalued people were waiting for its results to come and when the result started flowing in we saw upside and the stock moved beyond the IPO listing levels.

People who are holding LIC housing finance, some of them have hold it for long-term some of them for medium-term, lot of mutual funds, Lot of foreign investors, Lot of FII’s are holding it and of course there is a trading community that do swing trading in LIC housing finance stock.

Why is it important to talk about LIC housing finance today? Because when we look at the earning of the company and when we look at the price of the stock against its earning, it looks extremely undervalued. Company is into the business of financing homes and commercial properties. Let’s talk about some data point and evaluate where does the whole sector stand with respect to valuation and where does the LIC start? If you look at the sector price to earnings ratio it is around 9.7 and LIC housing finance, price to earnings nearby 7.

Now when you look at the other NBFCs or when you look at the banks in general the price to earnings has an average of around 15 to 20 value where in the housing finance sector looks undervalued. Housing in India and the commercial side of development in Real State has exploded and will explode more in the near future. Yes, this sector has a lot of competition when it comes to financing these, housing projects and commercial projects, there are banks which are always eager to fund these side of business and of course there are other NBFCs which are in competition with LIC housing finance. But needless to say this sector has great potential hence there will be more and more headspace for all these companies to grow and hence their valuation to grow further.

The most important thing that the people who are interested in investing in the sector should never forget that earlier this sector used to be known for delay in the project’s, real estate developer running away and projects goes to halt. Now with the laws getting better and better this sector is getting organised and we have seen examples of business man who are offenders and our identified in money laundry activities have been put behind the bars and the government and the banks have tried to recover their money.

So with all these reforms happening & the law is getting better day by day this sector will going to get better and there will be lot of confidence in the consumer with respect to the consistency that the sector will bring on table. Hence we will see that the overall valuation will going to improve in the companies like LIC housing finance.

Disclaimer :- All the facts & the figure presented in the article are taken from internet and all the opinion presented in the article are authors personal opinion and this is not at all an investment suggestion. Before any buying and selling in the stock, please check with your investment advisor.