LIC Housing Finance Ltd.|Q3FY15 Result/Concall Update | Stable performance continues. revising upwards target price to Rs 551 from Rs 485 and maintain BUY. :: IndiaNivesh

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LIC Housing Finance reported inline results with Net Interest income growth of
20% yoy at Rs 5.48 bn (vs exp of Rs 5.38 bn). Operating profit came in at Rs 5.28
bn, slightly ahead of expectation of Rs 5.16 bn. Net profit was ahead of expectation
by 4% at Rs 3.44 bn largely led by lower than expected provisioning expense.
Asset quality continues to remain strong at Gross / Net NPA of 0.6 / 0.3 respectively.
Valuations at 2.4x and 2.1x for FY16E and FY17E remain reasonable, hence
continue to maintain buy with upwards revised target price of Rs 551, rolling over
multiple to 2.5x FY17E ABV.
Result update:
Loan growth remains steady, project loans started picking up:
Loan growth of LIC housing finance remains stable at 18% yoy to Rs 1019 bn with
18.5% yoy growth in individual loan book to Rs 993.6 bn. Project loans have started
to pick up with sequential increase of 8% to Rs 25.8 bn. Proportion of developer
loan to total loans was stable at 2.5%. Disbursements grew by 25% yoy to Rs 76.3
bn led by 23% yoy increase in individual loans and 51% yoy in project loans. The
company has strong pipeline of sanctioning in project loans and expecting around
Rs 6-7 bn disbursements in Q4FY15.
Loan / Borrowings (Rs mn) % of total Q3FY15 Q3FY14 % YoY Q2FY15 % QoQ
Loan book 100.0 1019440 864220 18.0 975282 4.5
Individual 97.5 993620 838390 18.5 951295 4.4
Project 2.5 25820 25830 0.0 23987 7.6
Outstanding Borrowings 905720 777910 16.4 882250 2.7
Source: Company, IndiaNivesh Research
Borrowings of LIC housing was up 16% yoy to Rs 906 bn of which 19.2% is from
banks, 71.0% are NCDs and remaining are public deposits and borrowings from
NHB and LIC.
Stable NIMs:
NIMs (calc) were stable at 2.2%. Net Interest income grew by 20% yoy to Rs 5.5 bn,
largely inline with expectation of Rs 5.4 bn. Despite higher disbursements in high
yielding project loan segment, margins were stable mainly because the chunk of
disbursements is done at the end of the quarter. In FY16, Rs 250 bn (24.5% of the
loan book) loans which are under fixed category are likely to convert to floating
rate where the interest differentials are 100 to 120 bps. However we believe base
rate of banks are likely to come down which will make LIC housing to cut their
lending rates to sustain the current growth rate. Therefore we are keeping our margin
estimates at 2.2% both for FY16E and FY17E.

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