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LIC Housing Finance (LICH.BO)
Neutral Equity Research
Above expectations; strong NII but we remain skeptical on margins
Strong NII growth on PLR hikes
LICHF reported 4QFY11 net profit of Rs3.15 bn, a 47% yoy growth, 22% ahead of
GSe and +25% vs. Bloomberg consensus. Key highlights: (1) NII was 18% ahead
of GSe, growing 41% yoy driven by c.30bp qoq expansion in NIMs to peak levels
of 3.45%, on the back of a 50bp PLR hike in January. Management indicated NIMs
could trend down to 2.7%-2.9%, possibly as cost pressures have a lag effect. Cost
of funds remained stable qoq at c.8%, benefiting from higher-cost liabilities repricing.
Incremental cost of funds was 9.3%, as LICHF charged 9.9%-10.3% on its 5-
year fixed loan products (or c.85% of 4Q sales). For FY12E, we are factoring in a
40bp yoy compression in lending spreads and 20bp for NIMs; (2) Disbursement
growth was 34% yoy and 71% yoy for retail. However, excluding Rs12.5bn of staff
loans purchased from its parent LIC, overall growth would have been 9.5% yoy
and c.38% yoy in retail. Currently, developer loans are 8.5% of total, which mgmt.
indicated could rise to 10%-11% in the near term; (3) In 3Q, LICHF made provisions
on all fixed cum floating loans of Rs2.35bn (prescribed at 2% for teaser loans);
however, in 4Q, no provisions were made on 5-year fixed products, while
Rs189mn were provided on 3-year fixed products, as LICHF awaited clarity on
duration from NHB.
We retain Neutral; margin pressure could keep stock range-bound
We fine-tune our FY12E/FY13E EPS by 3.4%/1.6% to reflect higher NII, and
introduce FY14E EPS. The stock is trading at 2.1X FY12E P/B and 9.4X
FY12E P/E, 30% below peak levels in FY08-10. Maintain Neutral as we
believe the stock could remain range-bound on margin pressure, and we
see better opportunity in other India financials. Our 12-m CAMELOT-based
TP of Rs230 remains unchanged. Downside risks: Lower growth. Upside
risks: (1) aggressive re-pricing of loans, (2) developments on banking license.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
LIC Housing Finance (LICH.BO)
Neutral Equity Research
Above expectations; strong NII but we remain skeptical on margins
Strong NII growth on PLR hikes
LICHF reported 4QFY11 net profit of Rs3.15 bn, a 47% yoy growth, 22% ahead of
GSe and +25% vs. Bloomberg consensus. Key highlights: (1) NII was 18% ahead
of GSe, growing 41% yoy driven by c.30bp qoq expansion in NIMs to peak levels
of 3.45%, on the back of a 50bp PLR hike in January. Management indicated NIMs
could trend down to 2.7%-2.9%, possibly as cost pressures have a lag effect. Cost
of funds remained stable qoq at c.8%, benefiting from higher-cost liabilities repricing.
Incremental cost of funds was 9.3%, as LICHF charged 9.9%-10.3% on its 5-
year fixed loan products (or c.85% of 4Q sales). For FY12E, we are factoring in a
40bp yoy compression in lending spreads and 20bp for NIMs; (2) Disbursement
growth was 34% yoy and 71% yoy for retail. However, excluding Rs12.5bn of staff
loans purchased from its parent LIC, overall growth would have been 9.5% yoy
and c.38% yoy in retail. Currently, developer loans are 8.5% of total, which mgmt.
indicated could rise to 10%-11% in the near term; (3) In 3Q, LICHF made provisions
on all fixed cum floating loans of Rs2.35bn (prescribed at 2% for teaser loans);
however, in 4Q, no provisions were made on 5-year fixed products, while
Rs189mn were provided on 3-year fixed products, as LICHF awaited clarity on
duration from NHB.
We retain Neutral; margin pressure could keep stock range-bound
We fine-tune our FY12E/FY13E EPS by 3.4%/1.6% to reflect higher NII, and
introduce FY14E EPS. The stock is trading at 2.1X FY12E P/B and 9.4X
FY12E P/E, 30% below peak levels in FY08-10. Maintain Neutral as we
believe the stock could remain range-bound on margin pressure, and we
see better opportunity in other India financials. Our 12-m CAMELOT-based
TP of Rs230 remains unchanged. Downside risks: Lower growth. Upside
risks: (1) aggressive re-pricing of loans, (2) developments on banking license.
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