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LIC Housing Finance Ltd Research Report - 21st Jan 2016

Banking | Published on Jan 19th 2016

IT

For 3QFY2016, LIC Housing Finance (LICHF) reported an earnings growth of 21.7% yoy with healthy growth of 35.0% yoy in net interest income, led by healthy growth in advances and stable margins. NII rises yoy; Impressive NIMs LICHF’s loan book grew at a healthy pace of 15.2% yoy to Rs1,17,396cr during 3QFY2016. The individual portfolio, which constitutes 97% of the total loan book, grew by 15% yoy. Loans to the developer segment, which saw a reversal trend from the past quarter, continued its upward momentum growing by 20% yoy to Rs3,091cr. Total disbursements growth was of ~10% yoy. Margins during the quarter were at 2.58% as compared to 2.20% in the corresponding quarter of the previous year. A significant decline in the cost of funds to 9.18% as compared to 9.59% in the corresponding previous year period along with increase in floating rate loans to 40% of the total loan portfolio aided the company in registering a healthy growth in the NIM by 38bp yoy to 2.58%. On the asset quality front, the Gross NPA ratio came in at 0.58% which declined by 2bp qoq, whereas the Net NPA ratio was stable at 0.32%. Provisions rose to Rs34.4cr compared to Rs6.8cr for 3QFY2015 and Rs30.1cr for 2QFY2016. Outlook and valuation: For companies like LICHF, the funding environment has eased; thus it will lead to lower cost of borrowing, while outlook for growth in retail housing loans remains positive, going forward. We expect the company to post a healthy loan book CAGR of 18.7% over FY2015-17E, which is likely to reflect in an earnings CAGR of 21.0% over the same period. The stock currently trades at 2.2x its FY2017E ABV. We maintain our Buy rating on the stock, with a target price of Rs592.

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CMP 463
Target Price 592
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)27,944.99
MCAP NSE (Rs in Cr)27,922.28
P/E (x)15.79
EPS (Rs.)35.06
BV (Rs.)199.12
Div Yield (%)0.99
FV (Rs.)2.00
P/BV (x)2.78
EV/Sales (x)10.75
EV/EBITDA (x)11.31

Shareholding Pattern (%)

Promoter40.0
Public & Others30.0
Foreign25.0
Institution5.0
Corporate0.0
Grand Total100.0

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