3QFY2016 Result Update | HFC
January 19, 2016
LIC Housing Finance
BUY
CMP
`463
Performance Highlights
Target Price
`592
Investment Period
12 months
Particulars (` cr)
3QFY16 2QFY16
% chg (qoq) 3QFY15
% chg (yoy)
NII
784
756
3.8
581
35.0
Stock Info
Pre-prov. profit
680
674
0.9
528
28.8
Sector
HFC
PAT
419
412
1.7
344
21.7
Market Cap (` cr)
23,376
Source: Company, Angel Research
Beta
1.4
For 3QFY2016, LIC Housing Finance (LICHF) reported an earnings growth of
52 Week High / Low
526/ 389
21.7% yoy with healthy growth of 35.0% yoy in net interest income, led by healthy
Avg. Daily Volume
18,22,713
growth in advances and stable margins.
Face Value (`)
2
BSE Sensex
24,188
NII rises yoy; Impressive NIMs
Nifty
7,351
LICHF’s loan book grew at a healthy pace of 15.2% yoy to `1,17,396cr during
Reuters Code
LICH.BO
3QFY2016. The individual portfolio, which constitutes 97% of the total loan book,
Bloomberg Code
[email protected]
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
Shareholding Pattern (%)
`3,091cr. 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
Promoters
40.3
previous year. A significant decline in the cost of funds to 9.18% as compared to
MF / Banks / Indian Fls
7.6
9.59% in the corresponding previous year period along with increase in floating
FII / NRIs / OCBs
35.0
rate loans to 40% of the total loan portfolio aided the company in registering a
Indian Public / Others
17.1
healthy growth in the NIM by 38bp yoy to 2.58%.
Abs. (%)
3m
1yr
3yr
On the asset quality front, the Gross NPA ratio came in at 0.58% which declined
Sensex
(11.1)
(14.0)
20.7
by 2bp qoq, whereas the Net NPA ratio was stable at 0.32%. Provisions rose to
LICHF
(6.4)
(4.8)
64.6
`34.4cr compared to `6.8cr for 3QFY2015 and `30.1cr for 2QFY2016.
Outlook and valuation: For companies like LICHF, the funding environment has
3-Year Daily Price Chart
eased; thus it will lead to lower cost of borrowing, while outlook for growth in
600
retail housing loans remains positive, going forward. We expect the company to
500
post a healthy loan book CAGR of 18.7% over FY2015-17E, which is likely to
400
reflect in an earnings CAGR of 21.0% over the same period. The stock currently
300
trades at 2.2x its FY2017E ABV. We maintain our Buy rating on the stock, with a
200
target price of `592.
100
Key financials (standalone)
0
Y/E March (` cr)
FY2014
FY2015
FY2016E
FY2017E
NII
2,019
2,349
2,945
3,570
Source: Company, Angel Research
% chg
25.8
16.4
25.3
21.2
Net profit
1,317
1,386
1,664
2,029
% chg
28.4
5.2
20.1
21.9
NIM (%)
2.4
2.3
2.5
2.5
Vaibhav Agrawal
EPS (`)
26.1
27.5
33.0
40.2
022 - 3935 7800 Ext: 6806
P/E (x)
17.8
16.9
14.1
11.5
[email protected]
P/ABV (x)
3.2
3.0
2.6
2.2
Chintan Shah
RoA (%)
1.5
1.4
1.4
1.4
022 - 4000 3600 Ext: 6828
RoE (%)
18.8
18.1
19.7
20.5
[email protected]
Source: Company, Angel Research; Note: CMP as of January18, 2016
Please refer to important disclosures at the end of this report
1
LIC Housing Finance | 3QFY2016 Result Update
Exhibit 1: 3QFY2016 performance (standalone)
Particulars (` cr)
3QFY16
2QFY16
% chg (qoq)
3QFY15
% chg (yoy)
FY2015
FY2014
% chg
Interest earned
3,139
3,065
2
2,700
16
10,669
9,181
16
Interest expenses
2,355
2,309
2.0
2,119
11.1
8,310
7,174
15.8
Net interest income
784
756
3.8
581
35.0
2,359
2,007
17.5
Non-interest income
17
25
(29.2)
36
(50.9)
129
153
(15.6)
Operating income
802
780
2.8
617
30.0
2,488
2,160
15.2
Operating expenses
121
106
14.5
88
37.6
379
313
21.1
Pre-prov. profit
680
674
0.9
528
28.8
2,109
1,847
14.2
Provisions & cont.
34
30
14.6
7
406.0
7
21
(66.2)
PBT
646
644
0.3
522
23.9
2,102
1,826
15.1
Prov. for taxes
227
233
(2.3)
177
28.2
716
508
40.8
PAT
419
412
1.7
344
21.7
1,386
1,317
5.2
EPS (`)
8.3
8.2
1.8
6.8
21.7
27.5
26.1
5.2
Cost-to-income ratio (%)
15.1
13.6
14.3
15.2
14.5
Effective tax rate (%)
35.2
36.1
34.0
34.1
27.8
Net NPA (%)
0.3
0.3
0.3
0.2
0.4
Source: Company, Angel Research
Individual segment loan growth healthy; developer loan book
continues its reversal trend
LICHF’s loan book grew at a healthy pace of 15.2% yoy to `1,17,396cr 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
`3,091cr. Total disbursements growth was of ~10% yoy. The LAP portfolio
constitutes 6.4% of the total loan book for 3QFY2016 as compared to 5.6% of the
total loan book for 2QFY2016.
Exhibit 2: Advances growth healthy
Exhibit 3: Developer disbursements decline yoy
Advances (` cr)
Growth yoy (%, RHS)
Individual (` cr)
Project (` cr)
Total yoy (%)
120000
20.0
18.7
12000
30.0
18.0
17.9
19.0
24.5
388
17.0
18.0
10000
23.2
17.0
322
354
8000
448
20.0
15.2
16.0
181
13.9
105000
15.0
6000
14.0
10.1
10.3
13.0
4000
10.0
12.0
2000
11.0
90000
10.0
0
-
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
Source: Company, Angel Research
Source: Company, Angel Research
January 19, 2016
2
LIC Housing Finance | 3QFY2016 Result Update
NIM rises 2bp qoq, 38bp 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
and 9.29% in the sequential previous quarter coupled with increase in floating rate
loans to 40% of the total loan portfolio aided the company in registering a healthy
growth in NIM by 38bp yoy to 2.58%. Yields for the company have declined
marginally by 2bp yoy and 12bp qoq since the company has taken a PLR cut of
30bp for the quarter under consideration.
Exhibit 4: Healthy Increase in NIM to 2.58%
Exhibit 5: NII growth trend
3.25
NII (` cr)
Growth yoy (%, RHS)
850
40.0
35.0
800
34.1
2.56
2.58
2.47
750
2.40
2.41
29.0
2.50
30.0
2.23
2.2
700
2.16
2.19
19.9
650
18.9
600
20.0
1.75
550
500
450
10.0
1.00
400
350
300
-
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
Source: Company, Angel Research
Source: Company, Angel Research
Stable NPA ratios
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
`34.4cr compared to `6.8cr for 3QFY2015 and `30.1cr for 2QFY2016. Also, the
Gross NPA ratio in the individual loan segment declined to 0.32% as compared to
0.33% in 2QFY2016. The gross and net non-performing assets ratios thus
improved marginally on a sequential basis.
The surge in provisions was firstly due to increase in standard asset provisions. The
company’s LAP portfolio has risen from 5.6% in 2QFY2016 to 6.4% in 3QFY2016
of the total loan book which requires higher standard asset provisions at 1% as
compared to Individual loans which are at 0.4%. Secondly, increase in provisions
is also due to bucket non-performing loans which have moved to the higher
category. The Provision Coverage Ratio declined to 45.2% in 3QFY2016 from
54.3% in 2QFY2016.
January 19, 2016
3
LIC Housing Finance | 3QFY2016 Result Update
Exhibit 6: Asset quality improves marginally
Exhibit 7: Gross and Net NPA ratio trends
Gross NPA (` cr)
Net NPA (` cr)
PCR (%, RHS)
Gross NPA (%)
Net NPA (%)
0.80
800
52.6
54.3
60.0
48.0
45.4
50.0
45.2
0.60
600
40.0
0.40
400
30.0
20.0
200
0.20
10.0
-
-
0.00
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
Source: Company, Angel Research
Source: Company, Angel Research
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 recommend a Buy rating on the stock, with a target price of `592.
Company Background
LIC Housing Finance (LICHF) is one of the largest specialized mortgage lenders in
India, with a balance sheet size of more than `1,18,500cr. The credit portfolio for
LICHF is ~`1,17,000cr, of which more than ~97% is derived from the retail
segment. The company has a network of ~230 offices spread across the country
and is promoted by the state-owned life insurance behemoth, Life Insurance
Corporation of India (LIC) which holds a 40.3% stake in the company.
January 19, 2016
4
LIC Housing Finance | 3QFY2016 Result Update
Income statement (standalone)
Y/E March (` cr)
FY2012 FY2013 FY2014 FY2015 FY2016E FY2017E
NII
1,481
1,605
2,019
2,349
2,945
3,570
- YoY Growth (%)
2.8
8.4
25.8
16.4
25.3
21.2
Other Income
143
128
142
139
157
175
- YoY Growth (%)
(56.7)
(10.6)
10.5
(1.9)
12.6
11.8
Operating Income
1,624
1,733
2,160
2,488
3,101
3,745
- YoY Growth (%)
(8.3)
6.7
24.6
15.2
24.6
20.8
Operating Expenses
237
282
313
379
442
505
- YoY Growth (%)
9.8
18.9
11.1
21.1
16.5
14.3
Pre - Provision Profit
1,387
1,451
1,847
2,109
2,659
3,240
- YoY Growth (%)
(10.8)
4.6
27.3
14.2
26.1
21.8
Prov. & Cont.
156
79
21
7
136
164
- YoY Growth (%)
(40.2)
(49.5)
(72.8)
(66.2)
1,769.7
21.0
Profit Before Tax
1,231
1,372
1,826
2,102
2,524
3,076
- YoY Growth (%)
(4.9)
11.5
33.0
15.1
20.1
21.9
Prov. for Taxation
317
347
508
716
859
1,047
- as a % of PBT
25.7
25.3
27.8
34.1
34.1
34.1
PAT
914
1,026
1,317
1,386
1,664
2,029
- YoY Growth (%)
(6.2)
12.2
28.4
5.2
20.1
21.9
Balance sheet (standalone)
Y/E March (` cr)
FY2012 FY2013 FY2014
FY2015 FY2016E FY2017E
Share Capital
101
101
101
101
101
101
Reserve & Surplus
5,581
6,380
7,432
7,717
9,019
10,605
Loan Funds
56,087
68,764
81,486
96,532
1,14,390
1,36,124
- Growth (%)
24.2
22.6
18.5
18.5
18.5
19.0
Other Liab. & Prov.
2,786
4,407
4,414
5,622
6,807
8,247
Total Liabilities
64,556
79,653
93,432
1,09,972
1,30,317
1,55,078
Investments
164
185
199
237
281
334
Advances
63,080
77,813
91,341
1,08,361
1,28,407
1,52,805
- Growth (%)
23.5
23.4
17.4
18.6
18.5
19.0
Fixed Assets
62
62
76
80
94
112
Other Assets
1,249
1,593
1,817
1,295
1,534
1,826
Total Assets
64,556
79,653
93,432
1,09,972
1,30,317
1,55,078
January 19, 2016
5
LIC Housing Finance | 3QFY2016 Result Update
Ratio analysis (standalone)
Y/E March
FY2012
FY2013
FY2014
FY2015
FY2016E
FY2017E
Profitability ratios (%)
NIMs
2.6
2.3
2.4
2.3
2.5
2.5
Cost to Income Ratio
14.6
16.3
14.5
15.2
14.2
13.5
RoA
1.6
1.4
1.5
1.4
1.4
1.4
RoE
18.6
16.9
18.8
18.1
19.7
20.5
Asset Quality (%)
Gross NPAs
0.42
0.61
0.67
0.46
0.51
0.48
Net NPAs
0.13
0.35
0.39
0.22
0.28
0.26
Provision Coverage
68.0
41.4
41.9
52.6
44.5
44.5
Per Share Data (`)
EPS
18.1
20.3
26.1
27.5
33.0
40.2
ABVPS (75% cover.)
112.2
125.2
145.2
152.6
176.7
207.6
DPS
3.6
3.8
4.5
5.0
6.0
7.3
Valuation Ratios
PER (x)
25.6
22.8
17.8
16.9
14.1
11.5
P/ABVPS (x)
4.1
3.7
3.2
3.0
2.6
2.2
Dividend Yield
0.8
0.8
1.0
1.1
1.3
1.6
DuPont Analysis
NII
2.5
2.2
2.3
2.3
2.5
2.5
(-) Prov. Exp.
0.3
0.1
0.0
0.0
0.1
0.1
Adj. NII
2.3
2.1
2.3
2.3
2.3
2.4
Treasury
(0.0)
(0.0)
0.0
0.0
0.0
0.0
Int. Sens. Inc.
2.3
2.1
2.3
2.3
2.3
2.4
Other Inc.
0.2
0.2
0.2
0.1
0.1
0.1
Op. Inc.
2.5
2.3
2.5
2.4
2.5
2.5
Opex
0.4
0.4
0.4
0.4
0.4
0.4
PBT
2.1
1.9
2.1
2.1
2.1
2.2
Taxes
0.5
0.5
0.6
0.7
0.7
0.7
RoA
1.6
1.4
1.5
1.4
1.4
1.4
Leverage
11.9
11.9
12.4
13.2
14.2
14.4
RoE
18.6
16.9
18.8
18.1
19.7
20.5
January 19, 2016
6
LIC Housing Finance | 3QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and Metropolitan Stock Exchange of India Limited. It is also registered as a Depository Participant with
CDSL and Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Private Limited is
a registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number
INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing
/dealing in securities Market. Angel or its associates including its relatives/analyst do not hold any financial interest/beneficial
ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /
managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst
has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity
of the company covered by Analyst.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
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While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
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Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
LIC Housing Finance
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
January 19, 2016
7