Angel Broking has a buy call on GIC Housing Finance with a target price of Rs 655.

The current market price of GIC Housing Finance is Rs 370.40.

Time period given by the brokerage firm is one year when GIC Housing Finance price can reach defined target.

Backed by the new management, GICHF is aiming for 2.0x growth in the loan book over the period of FY16-FY19E to Rs 16,000 crore.

GICHF has healthy capital adequacy, and is seeing an increase in demand for home loans. GICHF’s loan book is expected to report 24.3 per cent loan growth over next two years.

GICHF is consistently decreasing bank borrowing and increasing high yield loan book which is expected to boost its Net Interest Margin.

The share of bank borrowing was 75 per cent in FY15, which fell to 55 per cent in FY17.

In our opinion, the impetus on lower bank borrowings and increasing high yield loan book is likely to result in 17bps NIM over FY16-FY19E.

GICHF’s asset quality is on the higher side compared to other HFCs (As on FY17 GNPA-2.3 per cent and NPA-0.3 per cent).

This is primarily due to GICHF has not written off any bad asset and has not sold any bad assets to ARC. New Management is expediting asset quality improvement.

We expect the GICHF’s loan growth to grow at a CAGR of 24.3 per cent over next two years and RoA/RoE to improve from 1.7 per cent/19 per cent in FY17 to 2 per cent/23 per cent in FY19E.

The stock is currently trading at 2.1x FY2019E ABV.