LIC Housing Finance: Excess provision reversal :: CSEC Research

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Excess provision reversal

LIC Housing Finance’s performance was below expectations on account of lower loan book growth and margin pressure. Led by write back of excess provisions PAT was up 43%YoY at Rs 3.06b. Adjusted profit before taxes down 17%YoY.

Quarterly Highlights

·         Revenues and operating profits lower than expected

·         Business growth moderates further

·         Credit growth at 26.6%YoY

·         Disbursements to individuals up 8%YoY

·         Asset quality healthy, net NPLs at 0.3%

·         Margins under pressure

·         Net interest income down 7.5%YoY

·         Adjusted operating profits down 7.1%YoY

Valuation

At current levels the stock trades at 2X its FY13E adjusted book value (standalone) and about 9.3X its FY13E EPS (standalone). Low working capital requirements and a low fixed asset base aid in a commendable return on equity. With valuations having run up in the recent weeks we rate the stock aMARKETPERFORMER with a target price of Rs 273. Key risks to our recommendation include a lower than expected growth in disbursals and lower than expected spreads.

 

Regards,

CSEC Research