LIC Housing Finance - 4QFY2013 Result Update - Angel Broking

LIC Housing Finance (LICHF) reported a healthy set of numbers for 4QFY2013, with net interest income growth of 20.3% yoy and earnings growth of 24.7% yoy. Key highlights of the results are the sequential improvement in NIMs (36bp) and improvement witnessed on the asset quality front (Gross and Net NPA ratio lower by 13bp and 9bp, respectively to 0.61% and 0.36%).

NIMs and Asset quality, both improve qoq: LICHF's loan book grew strongly by 23.3% yoy to Rs. 77,812cr during 4QFY2013. Loans to the individual segment grew by 25.5% yoy, while loans to the developer segment declined by 16.3% yoy and 5.5% sequentially. Hence, the share of developer loans declined from 3.9% in 3QFY2013 to 3.4% for 4QFY2013. During the quarter, the margins increased by 36bp qoq, primarily due to the 27bp decline in the cost of funds, owing to ~25bp cut in base rate by most of its funding banks (around 30% of total interest bearing liabilities constitute bank loans) and also, due to downward pricing for some of its NCDs, which were due for re-pricing. Going forward, the Management targets an increase in the proportion of developer loans (3.4% currently) and Loan against property (2.6% currently) to 5% each by FY2014, to improve margins. As per the Management, in 1QFY2014, ~2,700cr of fixed-o-floaty loans are expected to re-price upwards by 200bp and in FY2014, ~9,000cr of NCDs having average costs of ~9.6%, are scheduled to reprise downwards. On the asset quality front, the company reported an improvement, as both gross and Net NPA levels came down sequentially by 12.5% and 15.8%, respectively, on an absolute basis.

During the quarter, the company witnessed slippage in an account worth ~Rs. 100cr in the developer loan book; however it recovered ~Rs. 50-60cr from an account (of the three accounts, that slipped in 3QFY2013) and reported further improvement in asset quality of individual loans, which aided it to report a sequential improvement in Gross NPA levels. The PCR improved by 230bp sequentially to 41.4%, as of 4QFY2013.

Outlook and valuation: We expect the company to post a healthy loan book CAGR of ~20% over FY2013-15E, which is likely to reflect in an earnings CAGR of ~20%, over the same period. At the current market price, the stock is trading at a P/ABV multiple of 1.5x FY2015E ABV. Historically, the stock has traded at 0.8-2.1x one-year forward P/ABV multiple over FY2006-13. We recommend an Accumulate rating on the stock with a target price of Rs. 281.

Source : Equity Bulls

Keywords