LIC Housing Finance Ltd. share price target

LIC Housing Finance Q1FY19 result was below our estimates on the Net Interest Income front. Disbursement growth declined to 10% (15% in Q1FY18) and Loan growth remained stable at 15%. NII growth remained muted at 7% YoY. On the operational front, PPP increased by 10.6% YoY due to a decline in the employee expenses. The asset quality has declined with GNPA touching 1.21% vs. 0.72% in Q1FY18 on the back of GNPA in the individual segment increasing to 0.81%. Previous quarter's numbers are adjusted and PAT for Q1FY18 is revised upwards by 2% as it moves towards Ind AS accounting. We have an ACCUMULATE rating on the stock with a target price of Rs 618,...

Our constructive thesis premised on the huge growth opportunity in the housing finance space and the government's push for housing for all'. LICHF's unparalleled distribution network (through agents) further augmented by geographical expansion will be a key growth enabler hereon. Improving margins coupled with better asset quality will boost profitability and crystallize into a RoAA jump of 11bps over FY18-20E. Maintain BUY with a TP of Rs 627 (2x Mar-20 ABV of Rs 314) In a seasonally weak quarter, LICHFs performance was grossly underwhelming. Deterioration in asset quality (despite a large recovery of ~Rs 700mn) was higher than the usual 1Q blip as individual GNPAs spiked (81bps vs 42bps QoQ). Though overall growth (+15%) was respectable, tepid growth in the core segment (up merely 9% YoY) lagged comparable peers. Despite the recent rate hikes (30bps over 1Q) the sequential dip (15bps to 2.34%) was also disappointing.

Headline asset quality continued to witness deterioration in Q1FY19. GNPA ratio saw a sequential increase of 43 bps to 1.21%, partly seasonal also. As per NHB norms, total gross NPAs of the company were at | 2036 crore vs. | 1304 crore in Q4FY18 (may not be fully comparable in Ind-As). Gross NPA in individual segment was 0.81% Margins remained under pressure with ~15 bps YoY decline to 2.34%, lower than our estimate. Advances traction came in line with estimate at 15% YoY to | 168652 crore. Individual book increased...

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 95% of the loan book with the balance coming from...

LIC Housing Finance (LICHF) reported 1Q19 earnings of INR 5.68bn, up 18% YoY on IndAS basis. Key highlights i) Disbursement grew by 10% YoY while Loan book grew 15% YoY supported by non-core segments - LAP (42% YoY) and developer segment (50% YoY) while individual segment remained muted 9% YoY. Proportion of non-core segments has now increased to 21% vs. 16.7% YoY. ii) There was some pressure on asset quality as GNPL ratio (Stage 3) increased 48bps YoY/42bps QoQ to 1.2% while coverage ratio declined to 25% (vs 48% in 1Q18 and 52% in 4Q18). iii) Pressure on spreads continued as calculated spreads declined to 1.31% (vs. 1.50% in 4Q18 and 1.48% in 1Q18). Company has increased its...

LICHF is the fourth-largest mortgage finance company in India. It provides loans for homes,...

Disbursements witnessed a growth of 15% YoY while Net Interest Income de- grew by ~3.5%YoY on account of higher interest expenses (11%YoY). PAT growth remained flat (~3%) as Net Interest Margin was down by 48bps at 2.49% YoY in Q4FY18. Asset quality deteriorated with a higher GNPA of 0.78% (+35bps YoY) and NNPA of 0.43% (+29bps YoY). ROE de grew by 200bps while ROA remained flat on account of lower provisioning. We expect loan growth to sustain due to strong mix of salaried class in the clientele and factor a loan-book growth of 16% CAGR over FY18-20E. We factor NII and earnings to grow at a CAGR of 15% and 17% respectively for FY 18-20E....

Operating Income grew by 4.36% to Rs. 3900.95 Cr in Q4FY18 when compared to the previous quarter. LIC Housing Finance Ltd Q4FY18 results Comment

Despite 19% growth in disbursement for the full year, loan growth is lower at 15% on account of higher repayments/pre-payments/shifting to competitors. Management has guided for a modest loan growth of 15% for FY19. Higher loan growth of 31% in LAP and 47% in developer loans, whereas growth in pure home loan modest at 11%. Post RERA implementation, management is targeting higher growth in developer loan segment....

Maintain BUY with a TP of Rs 636. (2x Mar-20 ABV of Rs 318) In a seasonally strong quarter, LICHFs results were largely uninspiring. Sequential NIM expansion was curtailed (16bps vs. and average of 23bps over FY12-17) despite a 34bps drop in CoF and rising share of higher yielding project loans (4.9% vs 4.0% QoQ) and LAP (14.3% vs. 13.2% QoQ).