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Research
LIC Housing Finance (LICHF IN) - Growth supported by non-core business; asset quality improves - CSEC Research
Posted On : 2017-05-07 19:32:58( TIMEZONE : IST )
Growth supported by non-core business; asset quality improves
- LICHF's loan book grew (15.5%YoY, 6.8%QoQ) to INR 1445bn in 4QFY17. Growth in project loans was strong at 60%YoY & LAP at 65.3%YoY. Home loans to Individual showed a sluggish growth of 9.1%YoY. Consequently, the share of individual and project loans stood at 96.2% and 3.8% of the overall portfolio respectively. LAP's share in the overall portfolio has grown by 220bps QoQ and is noted at 12.6% for 4QFY17 vs 10.4%in 3QFY17.
- Overall disbursements showed stable growth of 15%YoY at INR 152bn and was largely driven by disbursement in project loans (92.5% YoY). However, slowdown was noticed in core segment of Individual home loans (11% YoY).
- LICHF continues to reduce its bank borrowing which carries a high interest cost. Currently, bank borrowing constitutes only 9.1% of total borrowings vs. 32% in FY12. The benefit of low cost borrowings and increasing share of high-yielding LAP portfolio is reflected in NIM expansion which improved by 26bps YoY to 2.97%.
Valuation: The stock is currently trading at P/BV of 2.3X, P/E of 12.9X FY19E. Given healthy asset quality with improving margins on account of declining cost of funds and change in portfolio mix gives a positive outlook for LICHF. However, we believe that all the positive triggers are already factored in the stock price. We upgrade our target price of INR 640 (Prev. Target of INR 580/share), assigning a P/BV of 2.1X on FY19E and rate the stock MARKETPERFORMER.
Risks: Increased prepayment rate due to competition; asset quality risks due to increase of share in LAP segment.
Shares of LIC HOUSING FINANCE LTD. was last trading in BSE at Rs.720.85 as compared to the previous close of Rs. 716.55. The total number of shares traded during the day was 158188 in over 3541 trades.
The stock hit an intraday high of Rs. 727.4 and intraday low of 711. The net turnover during the day was Rs. 113865146.
