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LIC HOUSING FINANCE
PRICE: RS.998
RECOMMENDATION: BUY
TARGET PRICE: RS.1200
FY12E P/E:9.2X; P/ABV:2.0X
q Our loan book growth estimates factors in the business moderation, we
expect advances growth for FY11 at 30% yoy and for FY12 at 23% yoy.
q LICHF has already provided clarification on the CBI investigation referring
to its developer's loans portfolio
q Toned down our earnings estimates to factor in business moderation ;
stock has corrected by close to 50% from its highs, we upgrade our recommendation
to Buy from accumulate earlier with a revised price target
of Rs. 1200 (offers 20% upside from current levels).
Our loan book growth estimates factors in the business moderation,
we expect advances growth for FY11 at 30% yoy and for
FY12 at 23% yoy.
LICHF reported strong performance during H1FY11 with a loan book growth of 36%
yoy to Rs. 433.8bn, of which developer's loan formed 11% to Rs. 48.9bn. We are of
the view that the company would largely remain focused towards retail mortgage
loans which form close to 89% of the loan book while it would see some moderation
in the developer's loan portfolio going forward. Our loan book factors in moderate
growth in FY12. We also opine that since the individual mortgage sanction
during H1FY11 remained strong, clocking a growth of 42% yoy to Rs. 63bn, overall
business growth in the FY11 will continue to remain strong. We expect mortgage
loan growth of 30% yoy for FY11 to Rs. 495bn and 23% yoy in FY12 to Rs. 606bn.
LICHF has already given clarification on the CBI investigation referring
to its developer's loans portfolio
LICHF has clarified on the reports suggesting CBI investigation referring to its exposure
to developer's loan. The company has clarified on the issue to the exchanges
indicating that all the loans have been approved in compliance with relevant regulatory
norms. It has also indicated that all the loans in question are performing assets
and are secured by underlying assets to the full satisfaction of the approving authority.
Developer loans form close to 11.3% of the outstanding loan book with Gross NPA
of 0.08%, while the Gross NPA in the individual portfolio stood at 0.84%. LICHF has
provision coverage of 71.8% on its non-performing assets.
Toned down our earnings estimates to factor in business moderation
; stock has corrected by close to 50% from its highs, we upgrade
our recommendation to Buy from accumulate earlier with
a revised price target of Rs. 1200 (offers 20% upside from current
levels).
of 44% yoy in FY11 to Rs.96bn and 7% yoy in FY12 to Rs.103bn. LICHF NIM may
witnesses interest cost pressures due to rising interest rates. Importantly, close to
70% of the assets are on floating rates as against 65% of the liabilities. We expect
a NIM of 2.8% for FY11 and 2.7% for FY12.
Post the significant correction, the current market price indicates a 20% upside to
our revised price target of Rs 1200 (currently trading at 2.0x FY12 P/ABVx), upgrading
our stock recommendation to BUY from accumulate earlier.
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