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LIC Housing Finance
In line with expectations
Net profit of Rs 2.3 bn with Net operating income of Rs 3.6 bn
LIC Housing reported its Q2FY11 numbers in line with UBS estimate with Net
profit of Rs 2.3 bn (up 37% YoY) and Net operating income of Rs 3.6 bn (up 50%
YoY). Key highlights of the quarter were 1) Loan growth of 36% Y/Y, corporate
proportion inching up slowly,2) NIMs at 2.9%, down 10 bps QoQ, incremental
spreads down 12 bps 3) Low provisioning cost as asset quality improves from a
seasonally weak Q1 4) Cost to income stable at 14%, Tier-1 ratio at 9%
Approvals, disbursements growth remains strong
Approvals for the quarter grew 77% Y/Y with individual approvals growing by
29% Y/Y. Disbursements during the quarter grew by 36% with retail
disbursements growth of 13% YoY. Project share in disbursements was higher
during the quarter at 25% though the share in overall portfolio was maintained at
~11%. NII growth of 63% was in line with expectations.
Cost of funds increased by 10 bps during the quarter while lending yields remained
stable which reflected in slight margin compression of 10 bps QoQ. LICHF raised
its PLR on Oct 1 which should help maintain NIMs at current levels in Q3 as well.
Management is hopeful of maintaining NIMs above 2.8%.
Valuation: Maintain Neutral PT 1600
Current valuations at 2.7xFY12E book , 12.5xFY12E earnings are pricing in strong
operating performance in our view. We maintain Neutral with a PT of Rs 1600
derived using residual income model.
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