GIC Housing Finance - Advantage Urban Potential - Sunidhi

The fundamentals of GICHFL are improving after it is witnessing a declining trend in the cost of fund considering the fund mix. Earlier it was dependent on bank borrowings. Its NIMs is at 2.76% and making every effort to enhance the NIM. With the opening up of ECB and the bond market penetration, GICHFL is expected to improve the NIM to 2.8-2.9% going forward.

Increasing urban population, lower mortgage penetration levels, increasing affordability, the moderation in the interest rates will enable HFCs to maintain their growth momentum in loan disbursements. Recent positive developments like Priority Sector Lending status being restored (though capped at 5% of total PSL) for lending to HFCs, increase in limits of funding available from mutual funds & including the NHB and HFCs in the list of eligible borrowers for financing low cost housing projects tend to benefit HFCs including GICHFL going forward.

At the CMP of `83, the share is trading at a P/E of 4.6x and P/ABV of 0.7x on FY14E and a P/E of 3.8x and P/ABV of 0.6 on FY15E. We recommend BUY with a target price of `110 at which the share will trade at P/AB of 1.0x on FY14E and 0.9x on FY15E.

The 90% of GICHFL's business is concentrated in West & South. To maintain its growth momentum, the company will have to make efforts to increase penetration in the low focus North & Eastern regions.

GICHFL continues to face stiff competition from large players like HDFC & LIC Housing Finance, who frequently come out with new products at competitive rates. The company also faces competition from small players like Can Fin Homes, Dewan Housing, Ganesh Housing, Gruh Finance, etc.

Source : Equity Bulls

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