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LICH.BO, LIC Housing Finance Ltd. (Rs964.10) /Uncertainty on Business
Outlook Prompts Downgrade
Moving to Equal-weight. While we still believe that over the longer term LICHF will continue to
benefit from India’s mortgage industry growth, a re-rating from current levels (which has been our
thesis) will be difficult given some headwinds. We also lower our price target to Rs905 to reflect
EPS estimate revisions and reduced longer-term volume and margin assumptions, as well as a
higher bear case weighting.
More caution on CRE loans likely to weigh on revenue progression. We believe that the
company is likely to be more cautious on lending to real estate developers (11% of loans). This
will constrain both volumes and margin progression.
Continued tight liquidity conditions add to the pressure. Recent lending rate hikes by LICHF
will provide some offset – but the combined effect of a lower proportion of CRE loans and higher
funding cost pressures will likely lead to a weaker margin trajectory.
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