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LIC Housing Finance: Quarter in line apart from one-off…
LIC Housing Finance (LICHF) reported robust credit growth of 36% YoY to
| 46380 crore in line with our estimates. This resulted in NII of | 352 crore,
surging 54% YoY. Excluding | 229 crore of provisions on standard assets
for teaser loans and | 136 crore realised for 17% stake sale of LIC MF, PAT
was aligned with our estimates. The company reported PAT was | 213
crore for Q3FY11 (including one-off). During FY10-12E, we expect NII to
post 31% CAGR and PAT to post 27% CAGR to | 1060 crore.
Asset quality improves, FY11E PAT revised marginally
GNPA and NNPA declined QoQ to 0.67% (| 313 crore) and 0.18% (| 84
crore) from 0.74% and 0.29%. Developer loans formed 10.5% of the loan
book from 11.3% in Q2FY11. GNPA from developer loans stands at 0.08%,
providing comfort on asset quality. The management predicts aggressive
growth ahead from this segment, raising a few eyebrows. In our Event
Update dated December 29, 2010, we estimated an impact of 5-6% on
FY11E PAT, on account of higher provisioning. However, the provisions for
teaser loans are much higher, which could have impacted FY11E PAT by
~15%. However, profit from stake sale has cushioned the bottomline.
Hence, FY11E PAT has not been impacted significantly.
Well positioned on ALM, helps sustain NIM of ~3%
Retail loans that form 90% of the loan book have a profile that is 40% on
fixed interest rate and 60% on floating rates. Developer loans that form the
rest 10% of loan mix is entirely floating in nature. Total loan maturity of
65% is on floating rates while rest is on fixed rates. On the other hand,
liability profile is 55% fixed in nature and 45% floating. This helps LICHF to
maintain spreads and, thus, NIM. NIM went up 21 bps QoQ to 3.14% during
Q3FY11 due to a 50 bps hike in BPLR and despite a contraction in spreads
by ~45 bps. We expect an improvement in spreads in Q4FY11 on the back
of a further 50 bps hike in lending rates effective January 2011.
Valuation
LICHF has underperformed its peers in the recent period following the
recent scam reports. At the CMP of | 173, LICHF is trading at 1.6x FY12E
ABV, which looks attractive given that we expect RoA of 1.8% and RoE of
22%. We expect LICHF to maintain its asset quality. Hence, we have valued
the stock at 1.9x its FY12 ABV to arrive at a target price of | 200.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
LIC Housing Finance: Quarter in line apart from one-off…
LIC Housing Finance (LICHF) reported robust credit growth of 36% YoY to
| 46380 crore in line with our estimates. This resulted in NII of | 352 crore,
surging 54% YoY. Excluding | 229 crore of provisions on standard assets
for teaser loans and | 136 crore realised for 17% stake sale of LIC MF, PAT
was aligned with our estimates. The company reported PAT was | 213
crore for Q3FY11 (including one-off). During FY10-12E, we expect NII to
post 31% CAGR and PAT to post 27% CAGR to | 1060 crore.
Asset quality improves, FY11E PAT revised marginally
GNPA and NNPA declined QoQ to 0.67% (| 313 crore) and 0.18% (| 84
crore) from 0.74% and 0.29%. Developer loans formed 10.5% of the loan
book from 11.3% in Q2FY11. GNPA from developer loans stands at 0.08%,
providing comfort on asset quality. The management predicts aggressive
growth ahead from this segment, raising a few eyebrows. In our Event
Update dated December 29, 2010, we estimated an impact of 5-6% on
FY11E PAT, on account of higher provisioning. However, the provisions for
teaser loans are much higher, which could have impacted FY11E PAT by
~15%. However, profit from stake sale has cushioned the bottomline.
Hence, FY11E PAT has not been impacted significantly.
Well positioned on ALM, helps sustain NIM of ~3%
Retail loans that form 90% of the loan book have a profile that is 40% on
fixed interest rate and 60% on floating rates. Developer loans that form the
rest 10% of loan mix is entirely floating in nature. Total loan maturity of
65% is on floating rates while rest is on fixed rates. On the other hand,
liability profile is 55% fixed in nature and 45% floating. This helps LICHF to
maintain spreads and, thus, NIM. NIM went up 21 bps QoQ to 3.14% during
Q3FY11 due to a 50 bps hike in BPLR and despite a contraction in spreads
by ~45 bps. We expect an improvement in spreads in Q4FY11 on the back
of a further 50 bps hike in lending rates effective January 2011.
Valuation
LICHF has underperformed its peers in the recent period following the
recent scam reports. At the CMP of | 173, LICHF is trading at 1.6x FY12E
ABV, which looks attractive given that we expect RoA of 1.8% and RoE of
22%. We expect LICHF to maintain its asset quality. Hence, we have valued
the stock at 1.9x its FY12 ABV to arrive at a target price of | 200.
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