LIC Housing Finance - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, LIC Housing Finance (LICHF) posted a weak set of numbers, with net profit declining by 19.4% yoy, below our estimates, mainly because of lower net interest income (NII) than estimated by us. We recommend an Accumulate rating on the stock.

NIM disappoints again, as disbursements to the developer segment remain sluggish: For 4QFY2012, LICHF's loan book grew strongly by 23.5% yoy (7.4% qoq) to Rs.63,080cr. Loan growth was driven by loans to the individual segment, which grew by 28.2% yoy to Rs.59,895cr, while loans to the developer segment declined by 26.9% yoy to Rs.3,185cr. The proportion of developer loans to overall loans dipped further from 6.0% in 3QFY2012 (10.5% as of 3QFY2011) to 5.0% in 4QFY2012. Disbursement growth to the individual segment (Rs.6,345cr) was healthy during 4QFY2012 at 21.6% yoy (adjusted for one-off staff loan portfolio of Rs.1,245cr acquired from LIC of India). In 3QFY2012, management had guided for ~Rs.1,000cr of disbursals to high-yielding project loans during 4QFY2012; however, it disbursed only Rs.274cr. The company's NIM has been on a downward trajectory and was lower by 100bp yoy at 2.4% for 4QFY2012. LICHF chose to utilize the extra provisions it is carrying on its balance sheet during 4QFY2012, leading to negative provisioning expenses of Rs.2cr. The company's asset quality continued to be stable, with gross NPA at 0.42% (0.47% in 4QFY2011) and net NPA at 0.14% (0.03% in 4QFY2011). Provision coverage for LICHF as of 4QFY2012 stands at 66.7% (51.1% in 3QFY2012 and 93.7% in 4QFY2011).

Outlook and valuation: At the CMP, the stock is trading at a P/ABV multiple of 1.7x FY2014E ABV of Rs.156.0cr. Historically, the stock has traded at 0.8-2.1x one-year forward P/ABV multiple over FY2006-12, with a median of 1.4x, but it has been rerated over the past three years to 1.9x average. With loan growth expected to be healthy over FY2013-14 (factored in a 24% CAGR) and considering that interest rates have a downward bias going ahead, we recommend Accumulate on the stock with a target price of Rs.286.

Source : Equity Bulls

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