Embarking on an exciting journey - LICHF :: HDFC Securities

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Embarking on an exciting journey
LICHF’s results were in-line with our estimates with
core/net earnings growth of ~20/5%. Individual
business momentum was maintained with
disbursements/loans growth of 23/19%. As expected,
spreads were stable at 1.2% and incremental spreads
inched up 20bps QoQ to 1.5%. Asset quality further
improved sequentially with a fall in retail GNPA (at
historic lows). Developers GNPA were stable QoQ.
Despite the stiff competition, LICHF has managed to
gain market share. A steadily rising proportion of
high yielding LAP & Developer loans coupled with
decline in interest rates should provide a fillip to
NIMs. Maintain BUY with a revised TP of Rs 520
(2.5xFY17E ABV).
 NII at Rs 5.5bn grew 19/3% YoY/QoQ with flattish NIMs
and 18% book growth. Staff cost jumped ~24% QoQ to
Rs 364mn led by downward revision in discount rates.
Tax provisions inched up with DTL provisions of Rs
340mn. PAT (Rs 3.4bn) growth of +5% YoY was in-line.
 LICHF's loan book grew 18/5% YoY/QoQ led by strong
retail momentum. Individual disbursements (Rs 72bn)
& loans (Rs 994bn) grew 23/19% YoY & 2/4% QoQ.
Eight quarter high developer disbursements of Rs
4.5bn led to a ~8% QoQ rise in developer loans (Rs
25.8bn; 2.5% of loans). Further, with strong sanctions
of Rs 6.3bn in the current quarter, management hinted
at a further rise in disbursements. Share of LAP further
increased to ~5% vs. 4% in 2Q. Management
maintained its incremental guidance of 8% share. We
revised our loan growth to 19% CAGR over FY15-17E.
 NIMs/spreads at 2.2/1.2% were flat QoQ led 17bps
decline in yields. In 2Q, developer yields jumped
~460bps to ~17% (with int. booking of Rs 240mn from
the upgraded account). However, incremental yields
were flattish at 11%. CoF declined 16bps to 9.5% with a
shift towards NCD (71%; +300bps) vs. bank borrowings
(19.2%; -240bps). Incremental CoF too declined ~20bps
to 9.4%. With a rising share of LAP & developer loans,
falling interest rates and asset re-pricing of Rs 250bn in
FY16E, management expects a gradual improvement in
NIMs. We have factored NIMs of 2.4% over FY15-17E.
 Led by ~10% decline in retail GNPA to Rs 3.3bn (33bps
of loans), LICHF's GNPA declined ~5% QoQ to Rs 5.8bn
(0.57%). Developer NPAs were stable at Rs 2.5bn. We
do not expect any negative surprise in asset quality
and have factored GNPAs of 65bps over FY15-17E.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010721