LIC Housing Finance Ltd. share price target

LIC Housing Finance (LICHF) reported a marginal 2% YoY increase in PAT toINR5.4b (5% beat), helped by better than expected loan growth and lower credit costs. Loan book growth remained in line with past trends at 15-16% YoY, with core home loans growing at 11% YoY. Loan mix continued to shift towards non-core loans, with the share of LAP and developer loans increasing 180bpQoQ to 19.2%. Disbursements grew 15% YoY to INR174b, driven by 17% YoY increase in home loan disbursements to INR110b.

ICICI Securities Ltd | Retail Equity Research PAT at | 539 crore (up 2% YoY) was in line but mainly aided by lower than expected provisions & high fee income (up 63% YoY) On the operational front, the performance was muted with PPP declining 3% YoY to | 867 crore. This is owing to 3.5% YoY decline in NII to | 1004 crore and rise in operating expenses (CIR was at 20.5%, higher than seen in last several quarters) Headline asset quality witnessed improvement QoQ, which is also a...

LIC Housing Finance (LICHF) net profit was up 2% YoY (4% higher than JMFe) due to higher than expected margins and lower credit costs. Key Highlights i) Disbursement grew by 15% YoY while Loan book grew 15% YoY supported by non-core segments - LAP (31% YoY) and developer segment (47% YoY) while individual segment remained muted 11% YoY. Proportion of non-core segments has now increased to 19.2% vs. 16.4% YoY ii) Calc. spreads declined 45bps YoY to 1.50% driven by 78bps YoY decline in yields and higher slippages during the year. To tackle the decline in yields, company has now increased its lending rates by 20bps in April 2018 iii) Company has increased its processing fees across...

Q3FY18 PAT at Rs 4.9 bn (down 1.6% YoY) was largely in line with our estimate. Loan growth remained stable at 15.4% with individual loan (ex-LAP) growth at 10.8% (highest in 8 quarters). Disbursements growth was strong at 27% YoY on 32% YoY growth in individual disbursements.

Outlook: LICHF has performed decently on loan growth, however margin compression and deterioration in asset quality has impacted profitability. Composition of loan book in home loan segment has reduced to 83% attributable to sharper growth in LAP and developer loans. Management intends to retain home loan book composition above 80%. Spreads are compressed primarily on account of slower reprising of its borrowings as bulk of it is through NCD's which are fixed rate in nature. As a result, despite being triple AAA rated, its cost of funds is relatively on the higher side. Though asset quality on home loan and LAP segment is fairly robust,...

Maintain BUY with TP of Rs 655. (2.1x Dec-19 ABV) LICHFs 3Q results came in below expectations, owing to pressure on yields, as NIM further declined 5bps QoQ (42bps YoY) to 2.33%. Disbursement grew strongly at 27.1% YoY to Rs 112.3bn. The loan book growth was at 3.1%/15.4% QoQ/YoY. GNPAs shot up QoQ from 0.8% to 0.87%, owing to higher NPAs in the developers book.

ICICI Securities Ltd | Retail Equity Research Headline asset quality continued to witness deterioration in Q3FY18. GNPA, NNPA ratios saw a sequential increase to 0.87%, 0.49% from...

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...