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India Equity Research Reports, IPO and Stock News
India Equity Research Reports, IPO and Stock News
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Investment Rationale
§ Earnings momentum to remain strong: LIC Housing Finance with loan portfolio of US$11bn, is the second
largest housing finance company in India. Strong parentage, domain expertise and rising income levels, we
expect LICHF to witness robust 28% CAGR in its loan book, 37% CAGR in NII and 20% CAGR in net profit over
FY11-13E.
§ Low mortgage / GDP provides ample room for growth : Mortgage/GDP ratio in India has remained in sub-
10% levels providing room for growth. Despite steep price in real estate prices in certain pockets, with rising
income levels, evolution of nuclear family concept and flexible EMI, we expect demand for mortgage to outpace
overall system credit growth.
§ Tighter provisioning norms to act as a cover against uncertainties : Cap on LTV ratio and stringent
provisioning norms towards NPA including provisions towards dual rate scheme are likely to act as a cover in
uncertain environment. GNPA/NNPA at 0.67%/0.18% remain comfortable.
Valuations
§ With average RoE of 26% over FY11-13E, and valuations at 1.9x/1.5x FY12E/FY13E ABV, we believe that stock
offers an attractive investment opportunity.
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