LIC Housing Finance - Q1 FY22 Result Report - YES Securities

(Rating: ADD, TP: Rs 450, Upside: 9.8%)

Valuation re-rating requires better and consistent performance

- Most dejecting highlights of the quarter were a sharp contraction in NIM and a significant deterioration in GNPL.

- Gross Stage-3/GNPL increased from 4.1% as of March to 5.9% as of June. The adverse movement in overdue buckets mandated significant augmentation of ECL provisions leading to second successive quarter of elevated credit cost.

- With collection efficiency reverting to normal 98% in June (similar to March and December), incremental deterioration in dpd construct is unlikely during Q2 FY22. However, prudential provionsing (augmenting ECL which stands lower than peers across buckets) would call for more than usual credit cost for next couple of quarters.

- We cut forward earnings and ABV estimates by 10-20% on adverse adjustments to loan growth, NIM and credit cost assumptions.

- Though valuation looks undemanding at 1.3x FY23 P/ABV, the volatility in performance has been more than palatable in the recent past.
- We retain an ADD rating; but have reduced our 12m PT to 450 and we see continued underperformance in near term. Risks to our view would be a sharp recovery in loan growth and improvement in asset quality.

Shares of Lic Housing Finance Ltd. was last trading in BSE at Rs. 407.75 as compared to the previous close of Rs. 410.55. The total number of shares traded during the day was 224729 in over 6878 trades.

The stock hit an intraday high of Rs. 416.7 and intraday low of 406.2. The net turnover during the day was Rs. 91761964.

Source : Equity Bulls

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