LIC Housing Finance Ltd.|Q2FY15 First Cut Analysis:: IndiaNivesh

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LIC housing continues its stable performance with Net Interest income growth of
17% yoy (5% qoq) to Rs 5.3 bn, inline with expectation led by loan growth of 17%
yoy (4% qoq). Individual Loan book grew by 18% yoy to Rs 952 bn and Project loan
continues to decline and stood at Rs 24 bn. Net interest margins remain stable at
2.2%.
Operating profit was also inline with expectation at Rs 5 bn, up 9% yoy. Operating
expense growth was higher at 30% yoy to Rs 965 mn. Cost to income was at 16.2%
vs 12.3% in Q1FY15.
Net profit grew by 10% yoy to Rs 3.4 bn, slightly ahead of our expectation of Rs 3.4
bn. There was a provision write back of Rs 190 mn as against provisioning expense
of Rs 341 in Q2FY14. This could be due to lower slippages (improvement in asset
quality). We will try to get more update on same in conference call with the
management.
Asset quality improved with decline of 18 / 15 bps qoq decline in Gross and Net
NPA to 0.63% / 0.33%. Provision coverage ratio improved to 48% from 39% in
Q1FY15.
Valuation
At CMP of Rs 333, the stock is trading at P/ABV of 2x and 1.7x for FY15E and FY16E
respectively. We have a buy rating on the stock with target price of Rs 350. We will
come up with further updates after the conference call scheduled for 19th October
2014.

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