Global brokerage Morgan Stanley has raised target prices on five housing finance stocks as it expects a pick-up in disbursements and loan growth to support earnings in the affordable housing finance segment. Its revised targets imply upside of up to 42% in select stocks.
The brokerage made its biggest target revision for PNB Housing Finance, raising it by 12%, while also increasing targets for Aptus Value Housing Finance, Aavas Financiers, Can Fin Homes and Home First Finance Company India.
Morgan Stanley on housing finance companies: Set for strong growth phase
Morgan Stanley expects affordable housing finance companies to enter a stronger phase of earnings and stock returns after a slower FY26. Disbursement growth is estimated to accelerate to 20-26% year-on-year in FY27 from 11-13% in FY26 and could pick up as early as the first quarter, when the brokerage expects growth of 25-35%. Assets under management are expected to grow 21-25%.
The brokerage has raised its earnings per share estimates for the affordable housing finance companies under its coverage by 1-5% on higher loan growth assumptions. It expects earnings per share to record a compound annual growth rate of 17-20% between FY27 and FY29, with return on equity estimated at 16-21%.
Morgan Stanley on Aptus Value Housing Finance: ‘Overweight’
Morgan Stanley has raised its target price on Aptus Value Housing Finance to Rs 405 from Rs 395, a 3% increase. The revised target implies 42% upside.
Aptus is Morgan Stanley’s preferred affordable housing finance stock. The brokerage said the company’s earnings performance remains strong even as the valuation multiples implied by its target price are 20-30% below their five-year averages.
The target price values Aptus at 2.9 times FY28 estimated book value and 15 times estimated earnings. Morgan Stanley has raised its earnings per share estimates for the company by 2.6% for FY27, 2.4% for FY28 and 2.6% for FY29.
The brokerage expects Aptus’ assets under management to grow 23% in FY27 and 25% in both FY28 and FY29. Disbursement growth is estimated at 20% in FY27 and 25% in each of the following two financial years.
Aptus reported a return on equity of 21.2% and return on total assets of 8.2% in the fourth quarter of FY26. Its loan spread stood at 8.6%.
In its bull-case scenario, Morgan Stanley has a value of Rs 605 for Aptus, implying 112% upside. The bull case values the stock at 4.4 times FY28 estimated book value and 23 times estimated earnings.
Morgan Stanley on Home First Finance: ‘Overweight’
Morgan Stanley has raised its target price on Home First Finance to Rs 1,650 from Rs 1,585, an increase of 4%. The revised target implies 39% upside.
The brokerage said Home First has recorded the strongest loan and earnings growth in the segment even as its valuation has fallen. Its target price-implied multiples remain 2-9% below their respective five-year averages.
The target price values Home First at 3 times FY28 estimated book value and 22 times estimated earnings. Morgan Stanley raised its earnings per share estimates by 1.2% for FY27, 3.3% for FY28 and 4.7% for FY29.
The brokerage expects Home First’s assets under management to grow 25% in FY27, FY28 and FY29. Disbursement growth is estimated at 25% in each of the three financial years.
In its bull-case scenario, Morgan Stanley has a value of Rs 2,340 for Home First, implying 96% upside. The bull case assumes faster loan and earnings growth and values the stock at 31 times FY28 estimated earnings.
Morgan Stanley on PNB Housing Finance: ‘Overweight’
Morgan Stanley has raised its target price on PNB Housing Finance to Rs 1,405 from Rs 1,250, a 12% increase and the biggest target price revision among the five stocks. The revised target implies 29% upside.
The brokerage has taken coverage of PNB Housing Finance in the report with an ‘Overweight’ rating.
Morgan Stanley expects the company’s growing affordable housing business and the resumption of wholesale lending to support profitability and loan growth. It expects PNB Housing Finance to sustain loan book and earnings growth of around 20%.
The target price values the stock at 1.5 times FY28 estimated book value and 13 times estimated earnings. Morgan Stanley raised its earnings per share estimates by 0.9% for FY27, 1.6% for FY28 and 2% for FY29.
The brokerage expects assets under management in PNB Housing Finance’s affordable housing business to grow 37% in FY27, 32% in FY28 and 23% in FY29. Disbursement growth in the affordable housing segment is estimated at 42% in FY27, followed by 20% in FY28 and 25% in FY29.
| Housing Finance Stock | Rating | Revised Target Price | Projected Upside |
|---|---|---|---|
| Aptus Value Housing | Overweight | Rs 405 | 42% |
| Home First Finance | Overweight | Rs 1,650 | 39% |
| PNB Housing Finance | Overweight | Rs 1,405 | 29% |
| Can Fin Homes | Overweight | Rs 1,055 | 15% |
| Aavas Financiers | Equal-weight | Rs 1,555 | 3% |
In its bull-case scenario, Morgan Stanley has a value of Rs 2,315 for PNB Housing Finance, implying 112% upside.
Morgan Stanley on Can Fin Homes: ‘Overweight’
Morgan Stanley has raised its target price on Can Fin Homes to Rs 1,055 from Rs 1,025, an increase of 3%. The revised target implies 15% upside.
The brokerage sees Can Fin Homes as a value stock with high return on equity and lower valuation multiples. It expects loan growth to improve, although its forecasts remain below the company’s guidance.
The target price values Can Fin Homes at 1.8 times FY28 estimated book value and 12 times estimated earnings. Morgan Stanley raised its earnings per share estimates by 0.9% for FY27, 2.3% for FY28 and 2.9% for FY29.
The brokerage said the stock could move towards its bull-case valuation if the company meets or exceeds its guidance. Its bull-case value stands at Rs 1,435, implying 56% upside.
Can Fin Homes reported a return on equity of 23.8% in the fourth quarter of FY26, the highest among the housing finance companies in Morgan Stanley’s peer comparison. Return on total assets stood at 3.2%, while the loan spread was 3.6%.
Morgan Stanley on Aavas Financiers: ‘Equal-weight’
Morgan Stanley has raised its target price on Aavas Financiers to Rs 1,555 from Rs 1,490, an increase of 4%. The revised target implies 3% upside.
The brokerage retained its ‘Equal-weight’ rating on the stock. It said loan growth has moderated and is now below peers. While Morgan Stanley expects growth to improve, it estimates that it will remain below that of peers.
The brokerage said a significant improvement in loan growth towards the management’s aspiration of more than 20% could provide further upside.
Morgan Stanley raised its earnings per share estimates for Aavas Financiers by 1.1% for FY27, 2.5% for FY28 and 3.5% for FY29.
Why Morgan Stanley expects growth to pick up
Morgan Stanley expects a sustained pick-up in disbursements after the moderation seen in FY26. The brokerage said several issues seen during FY25 and FY26, including United States trade tariffs, state-specific issues, stress in microfinance and micro, small and medium enterprises, and irregular weather, have largely been resolved in its base case.
Asset quality at affordable housing finance companies has also remained stable despite concerns arising from stress in adjacent borrower segments. Credit costs remained within the companies’ long-term guided ranges, while non-performing loan ratios were stable, according to the brokerage.
Morgan Stanley also expects profitability to remain healthy across interest-rate cycles because affordable housing finance companies have greater pricing power than prime housing lenders.
What are the risks?
Morgan Stanley listed a deterioration in the macroeconomic environment, slower loan growth, and a deep asset-quality cycle among the main risks to its view.
The brokerage said customers served by affordable housing finance companies typically have informal sources of income, limited income documentation, and little or no credit history. Loan assessment and underwriting are therefore time-consuming, making execution important as lenders expand.
Disclaimer: This article summarizes a third-party brokerage report by Morgan Stanley on the housing finance sector and is published for informational purposes only. The stock target prices, ratings, and projected returns are the opinions of the analyst and do not constitute investment advice, an offer, or a solicitation to buy or sell any securities. Equity investments carry market risks; readers are advised to perform independent research and consult a SEBI-registered financial advisor before making any investment decisions.
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