LIC Housing Finance Ltd. share price target

ICICI Securities Ltd | Retail Equity Research LIC Housing Finance reported operationally healthy numbers with healthy NII growth of 42% YoY on the back of a deflated base Credit growth came in at 16% YoY to | 181698 crore while margins remained steady at 2.33% due to passing of rate hikes to customers. However, disbursement growth was flat YoY Loan traction was led by developer portfolio, which increased by a strong rate of 84% YoY to | 11364 crore (comprising 6.2% of total...

Maintain BUY with a TP of Rs 527 (1.5x Dec-20E ABV of Rs 351). 3Q was yet again a mixed bag for LICHF. While yields and spreads registered a commendable increase of ~21 and ~6bps respectively, QoQ, NIMs were flat QoQ at ~2.33%. Disbursals dipped ~11% QoQ, weighed down by lower project disbursals as individual disbursals (home loan +LAP) were flat, a mild disappointment.

31 January 2019 LIC Housing Finances (LICHF) 3QFY19 PAT increased 26% YoY to INR5.7b (in- line), driven by stable loan growth and low base of last year. LAP) were up only 2% YoY to INR115b in the quarter, while corporate disbursements increased 27% YoY to INR12b. Loan book grew 3% QoQ/ 16% YoY to INR1.81t. Given the lower balance transfers due to the tight liquidity situation, repayment rate (annualized) declined meaningfully from 20% to 16% YoY. NII grew 41% YoY as the company recognized a net loss on modification of loans amounting to INR149m in 9MFY19 v/s INR1.6b in 9MFY18. We reiterate our thesis that the worst of spreads is behind us and LICHF should be able to maintain/improve spreads, going forward (refer to our Given 93% of loans are floating rate and 74% of borrowings are on fixed rate, spreads are likely to remain stable or improve.

Well-rated corporates with strong parentage like LICHF would be able to borrow at much lower rates than peers, in these times of tight liquidity. Also, balance transfer out of LICHFs book will reduce drastically, going forward. We expect 12-13% CAGR in the loan book over FY18-21, driven by a pick-up in the core home loan growth and slowdown in LAP/developer loan growth. LIC Housing Finance Core home loan rate now starts at 8.8% (non-annualized) while that for LAP/developer is ~200bp higher. Given that >80% of the loan book is now at floating On the other hand, our analysis (click reveals that, given the liability structure, overall cost of funds for LICHF will rise only ~40bp cumulatively over FY18-20E. In addition, the company has been rated AAA by CRISIL since 2002. With its strong parentage and AAA-credit rating since 2002, we believe LICHF will be much better placed than peers in such times of tight liquidity. In addition, balance transfer pressure could ease as peers are facing liquidity pressure.

Modest Loan Growth: Loan growth was modest at 16%, driven by LAP and developer loans growing by 41% and 83% respectively. Whereas it core individual home loan segment has managed a growth of only 9%. Margin under pressure, likely to stabilize: NII growth of 5% is way lower than loan growth on account of 23bps compression in margins to 2.4%. It has taken a PLR hike...

Maintain BUY with a TP of Rs 515 (1.5x Sept-20E ABV of Rs 343). LICHFs 2Q was a mixed bag. While the business momentum was healthy, the stagnant margins and rise in GNPAs were disappointing. Disbursal growth was driven by individual (+30% QoQ) and project disbursals (+3.3x QoQ). While the overall growth (+16%) was at a multi-qtr high, tepid growth in the core segment (+9% YoY) lagged peers.

LIC Housing Finance Ltd Q2FY19 results Comment Operating Income grew by 3.73% to Rs. 4198.22 Cr in Q2FY19 when compared to the previous quarter. Also, it grew by 11.92% when compared with Q2FY18.

NII increased 5.1% YoY to | 1012 crore. It was mainly led by loan growth of 16.2% YoY to | 175953 crore & steady QoQ NIMs of 2.35% Loan traction was led by developer portfolio, which increased at a strong rate of 83% YoY to | 10852 crore (comprising 6.17% of total loans). Retail loans increased 13% YoY to | 165102 crore. Overall disbursement growth was strong in Q2FY19 at 30% YoY Headline asset quality was steady QoQ. The GNPA ratio was at 1.2%. Gross NPAs in individual segment were flat at 0.81%...

12 October 2018 LIC Housing Finance An analysis of the liability structure shows that LICHF still has a meaningful chunk of relatively high-cost liabilities that are set to mature over FY19-20. Assuming refinancing of these NCDs at 9.0%, the impact of overall cost of funds is only 15-20bp each year. Our base case assumption is that the NCDs maturing in FY19/20 as well as the new NCDs issued are at 9.0%. We have done a sensitivity analysis to see impact on PBT due to refinance of maturing NCDs at various interest rates.

Asset quality deteriorated with a higher GNPA of 1.21% (+49bps YoY) while, NPAs in the Individual Loan book increased to 0.81%. PAT grew by 18%(YoY) on account of lower than expected provisioning. We expect loan growth to sustain due to strong mix of salaried class in the clientele and factor a loan-book growth of 15% CAGR over FY18-20E. NII...