LIC Housing Finance Ltd. share price target

LICHF reported a weak Q2FY18 due to 12 bps YoY decline in NIM (2.4%) and further deterioration in asset quality (GNPA down 8 bps QoQ at 0.8%).

Upgrade to BUY. Revise the TP to Rs 675. (2.2x Sept-19 ABV) LICHFs 2Q results came in below expectations, owing to pressure on yields, as NIM further declined 12bps QoQ (30bps YoY) to 2.38%. The loan book was better at 3%/15.5% QoQ/YoY. GNPAs shot up QoQ from 0.72% to 0.8%, owing to higher NPAs in the developers book. NIM pressure was largely owing to yield pressure on advances, which declined 29bps. NII declined almost 5.3% QoQ (up 2.5% YOY) to Rs 9.4bn. Disbursement growth remained strong at 20% YoY, driven by the developers loan book growth at 65.8%. PAT moved 4.1%/-1.1% QoQ/YoY to Rs 4.9bn. Operating cost was stable.

Background: LIC Housing Finance (LICHF) provides housing loans to individuals and corporate bodies. The company is also engaged in the home equity space. The company is a distant second player among housing finance companies in India. LIC Housing has an established network of direct selling agents and home loan agents. Through its subsidiary, LIC Housing operates homes for senior citizens. Loans to individual including LAP forms 96.1% of the loan book with the balance coming from...

With continued downward re-pricing of home loans, NIM shrunk 12bp QoQ and 50bp YoY (note that the YoY comparison is off a high base). Consequently, NII declined 4% YoY to INR8.9b. GNPL ratio was up 8bp QoQ and 23bp YoY to 0.8%, driven by higher GNPL in the corporate loan book. GNPL in the corporate loan book increased from INR4.7b in 1QFY18 to INR5.7b now. Note that 1QFY18 itself was a high base, with three builder loans amounting to INR1.2b slipping into NPL in that quarter. However, one of those three accounts was upgraded in the quarter....

ICICI Securities Ltd | Retail Equity Research Asset quality continued to deteriorate. Pace of accretion has declined QoQ. GNPA, NNPA ratios saw a sequential increase of 8 bps & 5 bps QoQ to 0.8% and 0.43%, respectively. GNPA in individual segment increased 2 bps QoQ to 0.44%. The same surged 122 bps QoQ to 9.69% in developer segment (highest in last several quarters) NIM continued southward trend with ~12 bps QoQ decline at 2.38%. Advances traction remained healthy at 15.5% YoY to | 151417 crore....

We interacted with the management of LIC Housing Finance (LICHF) to get an update on business and demand outlook. Loan growth to remain stable at ~15% YoY and it plans to disburse ~Rs 500 bn in FY18.

LIC Housing reported a slightly subdued performance with NIMs of 2.5%, leading to a muted 9% YoY NII growth. Overall GNPAs rose to 0.72% (0.43% in FY17) with individual GNPAs rising to 0.42% (0.20% in FY17) owing to seasonality. PAT improved by 15% YoY to Rs 470cr. Strong earnings visibility, stable asset quality and sustained loan growth support our positive view on the stock.

We maintain Neutral. Revise the TP to Rs 706. (2.4x Mar-19 ABV) LICHFs 1Q results came in line with expectations, owing to pressure on yield as NIM declined 47bps QoQ (11bps YoY) to 2.5%. Loan book increased 1.7%/15% QoQ/YoY. GNPA shot up QoQ from 0.43% to 0.72%, owing to higher NPAs in the retail book. NIM pressure was largely owing to yield pressure on advances, which declined 26bps. NII declined almost 10% QoQ (up 13.6% YOY) to Rs 93.7bn. Disbursement growth remained strong at 15% YoY, largely driven by individual book growth of 17%.

Asset quality deteriorated as GNPA increased by 29bps QoQ to 0.72% and NNPA increased by 24bps QoQ to 0.38% on account of higher NPAs in retail book and 3 project accounts turning NPAs (GNPA for project loans increased to 8.4% from 6.3%). Loan to Value...

ICICI Securities Ltd | Retail Equity Research LICHF's bottomline came in below estimates. PAT increased 15.3% YoY to | 470 crore, which was below estimates. This was mainly on account of lower-than-expected NII at | 913 crore (up 10.7% YoY) vs. our estimate of | 1011 crore (up 22.6% YoY) NIM was at 2.5%, which was a bit lower-than-expected. Advances traction came in line with estimate at 15.4% YoY to | 147051 crore. Individual book increased 14.4% YoY to 141440 crore while...