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UBS Investment Research
LIC Housing Finance
S low disbursements otherwise inline
Event: Weak Q1FY12 as expected
LICHF reported Net profit of Rs 2.56 bn (21% y/y) in line with estimates. Net
interest income came in slightly lower than estimates as NIMs contracted 67 bps
q/q. Provisions were higher as NPA increased mainly due to seasonal factors
however low expense ratio helped offset this. Individual disbursements growth was
weaker than expected at 15%y/y while corporate disbursements were down 80%
y/y (likely reluctance of management); this dragged overall disbursements which
grew 5%y/y even as loan portfolio grew 32% y/y,3% q/q.
Impact: Maintain growth estimates
We expect disbursements growth to pick up and maintain our loan growth
estimates at 27%/24% for FY12/13 respectively. Management has become
selective in developer financing and there corporate disbursements will be lower
than FY11. However 20% growth in individual disbursements which is at lower
end of management guidance is sufficient to drive overall 27% growth in loans.
Action: Sell as valuations leave little upside
LICHF has been one of the best performing financial stocks YTD and is currently
trading at 2.1xFY12 book which is at a significant premium to its history and looks
fair in our view. Growth momentum could be at risk with higher interest rates,
withdrawal of popular fixed rate product and weakening demand.
Valuation: Maintain PT Rs 200
We value the stock using residual income method at Rs200 which implies 1.9x
FY12E book and 8x FY12earnings.
LIC Housing Finance
LIC Housing Finance Limited (LICHF) was established by LIC of India in June
1989 with the objective of providing long-term housing loans to individuals. It
was listed on the NSE in 1994. As at March 2010, LICHF had 181 marketing
offices and overseas representative offices in Dubai and Kuwait. It had 1,008
employees as of June 2010. During FY10, LICHF sanctioned loans amounting
to Rs180bn and disbursements worth Rs149bn. Its outstanding loan book stood
at Rs380bn in FY10. LIC holds 36.5% of shares outstanding and FIIs holds 32%
as at June 2010.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit; increase NPL risk;
impact fee income; and exert pressure on NIMs We believe a slowdown in real
estate volumes and a spike in interest rates could impact mortgage demand. A
spike in interest rates and irrational competition will impact NIMs. A change in
management could lead to concerns on the continuity of the company’s strategy
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
LIC Housing Finance
S low disbursements otherwise inline
Event: Weak Q1FY12 as expected
LICHF reported Net profit of Rs 2.56 bn (21% y/y) in line with estimates. Net
interest income came in slightly lower than estimates as NIMs contracted 67 bps
q/q. Provisions were higher as NPA increased mainly due to seasonal factors
however low expense ratio helped offset this. Individual disbursements growth was
weaker than expected at 15%y/y while corporate disbursements were down 80%
y/y (likely reluctance of management); this dragged overall disbursements which
grew 5%y/y even as loan portfolio grew 32% y/y,3% q/q.
Impact: Maintain growth estimates
We expect disbursements growth to pick up and maintain our loan growth
estimates at 27%/24% for FY12/13 respectively. Management has become
selective in developer financing and there corporate disbursements will be lower
than FY11. However 20% growth in individual disbursements which is at lower
end of management guidance is sufficient to drive overall 27% growth in loans.
Action: Sell as valuations leave little upside
LICHF has been one of the best performing financial stocks YTD and is currently
trading at 2.1xFY12 book which is at a significant premium to its history and looks
fair in our view. Growth momentum could be at risk with higher interest rates,
withdrawal of popular fixed rate product and weakening demand.
Valuation: Maintain PT Rs 200
We value the stock using residual income method at Rs200 which implies 1.9x
FY12E book and 8x FY12earnings.
LIC Housing Finance
LIC Housing Finance Limited (LICHF) was established by LIC of India in June
1989 with the objective of providing long-term housing loans to individuals. It
was listed on the NSE in 1994. As at March 2010, LICHF had 181 marketing
offices and overseas representative offices in Dubai and Kuwait. It had 1,008
employees as of June 2010. During FY10, LICHF sanctioned loans amounting
to Rs180bn and disbursements worth Rs149bn. Its outstanding loan book stood
at Rs380bn in FY10. LIC holds 36.5% of shares outstanding and FIIs holds 32%
as at June 2010.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit; increase NPL risk;
impact fee income; and exert pressure on NIMs We believe a slowdown in real
estate volumes and a spike in interest rates could impact mortgage demand. A
spike in interest rates and irrational competition will impact NIMs. A change in
management could lead to concerns on the continuity of the company’s strategy
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