LIC Housing Finance announced its unaudited results for Q4FY12. The top-line as well as
bottom-line came below our expectations on the back of lower NIMs.
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Key Highlights
Net Interest Income (NII) registered a decline during the quarter by 11.8% YoY from
`4203.5 mn in Q4FY11 to `3707.7 mn in the current quarter on the back of lower NIMs
(decline of ~101 bps on YoY basis). However on QoQ basis margins improved by 17 bps
resulting in 13.8% jump in NII. The decline in NIMs on YoY basis was on the back of higher
cost of funds and slower disbursement growth in high yielding developer loan portfolio.
However, sequentially NCD issue in January and preferential capital allotment to LIC has
brought down the overall cost of funds resulting in higher NIMs. The management expects
NIMs to improve going forward in FY13 (guidance of 2.7-3.0% in FY13) led by higher
disbursement in developers portfolio (target of 10% of the total loan portfolio currently at
5.0%) coupled with repricing of fixed rate loans (Fix-o-Floaty). The company's teaser rate
home loan portfolio under Fixed-o-Floaty scheme worth `120 bn would get re-priced in the
current fiscal.
Sharp decline in NIMs and subdued growth other income has resulted in 19.4%
decline in Net Profit during Q4FY12 despite provision write back of `23.9 mn in the
current quarter. Sequentially net profit registered a decline of 17.0% despite higher NIMs
mainly on the back of higher write back of provision in Q3FY12 (`796.9 mn as against
`23.9 mn in the current quarter). Last quarter, the company has aligned its provisioning
policy on Standard Assets / NPA to match with revised NHB norms and consequently the
company has reversed the excess provision of `788.9 mn (net of provisioning required to
be made in the last quarter).
Outstanding Mortgage Portfolio as on Q4FY12 was `630.8 bn as against `510.9 bn as
on Q4FY11, registering a YoY growth of 23.5% (7.4% QoQ). Total loan disbursements
registered a growth of 19.3% (40.2% QoQ) during the quarter mainly led by robust
disbursement in the individual’s loan portfolio (growth of 22.0% YoY, 38.9% QoQ). Loan
disbursements to developers were `2.74 bn as against `3.33 bn YoY. Lower disbursal in
the developer’s portfolio has consequently lowered the proportion of the developer loan
portfolio to ~5.0%. The company is targeting a corporate developer loan book at 10% over
next 1-2 year. Going ahead, we expect loan book CAGR of 21.9% over FY12-14E.
Asset quality improved during the quarter with gross NPA registering a decline of 5 bps
and 21 bps on YoY and QoQ basis respectively. However the net NPA increased by 6 bps
on YoY basis. The management is confident to continue to keep asset quality under check
going forward.
Outlook and Valuations
We believe the margins to rebound going forward on the back of repricing of fixed rate loans
and higher disbursements to high yielding developers portfolio. We expect margins to improve
by 22 bps in FY13E. Added to this release of provisions on teaser portfolio (that will come for
repricing) is likely to keep the provisioning expenses low going forward. With stable asset
quality we estimate LICHF to report an EPS CAGR of 35.1% over FY12-FY14E. ABV is
estimated to grow at 19.0% CAGR during the same period. Going forward, we expect the
company to deliver healthy net interest income growth (CAGR 29.2% FY12-14E) and earnings
growth (CAGR 35.1% FY12-14E). We have slightly increased our target price to `285.1
from `266.6 earlier, giving an upside potential of 14.1% from current levels, thus
changing the rating from Neutral to Accumulate.
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