Accumulate LIC Housing Finance Ltd. - Kotak

Q4FY12: Core performance largely in line

- NII came slightly below our expectations (Rs.3.71 bn vs estimate of Rs.3.86 bn) while net income came largely in line at Rs.2.54 bn (Rs.2.55 bn estimated; decline of 19.4% YoY). NIM expanded 17 bps QoQ during Q4FY12, but declined 101 bps YoY on back of subdued developer loans. We believe NIM has bottomed out and is likely to move northward during next couple of quarters.

- Loan book growth moderated to 23.5% YoY during Q4FY12 mainly on back of 26.9% decline in developers lending. Disbursement to developers continued to decline and witnessed de-growth of 17.7% during Q4FY12, while individual segments saw some up-tick and grew 21.6% during Q4FY12 excluding staff loan portfolio worth Rs.12.45 bn during Q4FY11.

- Asset quality has remained stable - gross NPA marginally improved to 0.42% at the end of Q4FY12 as against 0.63% at the end of Q3FY12 and 0.47% at the end of Q4FY11. However, net NPA rose to 0.14% at the end of Q4FY12 as against 0.08% at the end of Q4FY12. Management has indicated that they do not perceive any big risk to its asset quality, in near term.

- At the CMP, stock is trading at 2.1x its FY13E ABV and 10.9x its FY13E earnings. We have tweaked earnings estimate for FY13E and now expect earnings to grow at 31.8% on low base during FY12. We do take cognizance of improvement in its NIM during FY13 on back of falling interest rate environment as well as re-pricing of its fix-o-float portfolio (Rs.90 bn). However, with limited upside from current levels, we maintain ACCUMULATE rating on the stock with revised TP of Rs.280 (earlier Rs.260) based on 2.25x its FY13 ABV.

Source : Equity Bulls

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