Accumulate LIC Housing; tgt of Rs 281: Aditya Birla Money

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26 Aug, 2025 12:21

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Aditya Birla Money is bullish on LIC Housing Finance and has recommended accumulate rating on the stock with a target of Rs 281 in its February 18, 2013 research report.
 
“LIC Housing Finance, Net Interest Income (NII) during the quarter registered a muted growth of 13.5 percent YoY (4.6 percent QoQ) from Rs3257.7 mn in Q3FY12 to Rs3696.6 mn on the back of lower NIMs (down by 18 bps YoY, 1 bps QoQ to 2.09 percent). Sequentially NIMs remained stable despite repricing of Fix-o-Floaty book (~25.0 bn) during the quarter, as the interest reversal (~Rs60 mn) on the delinquent developer’s loan (~Rs1.6 bn) capped its upside. Going forward, we believe margins to increase gradually due to higher incremental spreads (~1.7 percent as against avg of ~1.1 percent currently). Besides this the management has indicated that the bulk of the disbursements in developer’s portfolio during Q3 happened towards the end of the quarter, the impact of which on the NIMs will also flow through during Q4. The management expects the cost of funds to come down going forward with the reduction in base rate by the banks which will also aide in margin improvement going forward. Management aims NIMs of ~2.2 percent for Q4FY13E.”
 
“Muted growth in NII coupled with higher provisions (led by sharp deterioration in asset quality) resulted in 22.7 percent YoY (2.8 percent QoQ) decline in Net Profit. Provisions during the quarter stood at ~Rs 318.6 mn as against a write back of ~Rs 796.9 mn YoY (write back was on account of reversal of excess provision last year LICHF was carrying in its books). Asset quality deteriorated during the quarter with GNPA registering an increase of 11 bps YoY (14 bps QoQ) while NNPA increased by 14 bps YoY (17 bps QoQ). GNPA increased as three developer’s loan portfolio with a total outstanding of ~1.6 bn slipped into NPA (15 percent provided during the quarter resulting into higher provisions).”
 
“The management indicated that these delinquencies in the developer’s portfolio is adequately collateralised and expects it to be upgraded in Q4 (as it is due to temporary cash flow problems). Outstanding Mortgage Portfolio as on Q3FY13 was Rs727.0 bn as against Rs587.1 bn as on Q3FY12, registering a YoY growth of 23.8 percent (5.2 percent QoQ). Total loan disbursements registered a growth of 27.0 percent YoY (2.9 percent QoQ). Loan disbursements to developers picked up during the quarter to Rs4.97 bn from Rs1.54 bn YoY and Rs1.21 bn QoQ. Resultantly, developer loan portfolio increased 6.0 percent sequentially and stood at ~Rs28.2 bn (3.9 percent of total loan book) in the current quarter as against ~Rs35.4 bn in Q3FY12 (6.0 percent) & ~Rs26.6 bn (3.8 percent) in Q2FY13. Individual loan disbursement stood at ~Rs55.1 bn up 20.6 percent YoY (decline of 3.6 percent QoQ). Going forward, the management expects the growth momentum in retail portfolio to remain robust given strong sanction pipeline. However, the growth in developer’s portfolio will remain muted given slower execution of the projects. The management aims to take the overall share of the developer’s portfolio to ~5 percent by FY14E from 3.9 percent currently. We expect loan book CAGR of 21.2 percent over FY12-14E.”
 
“Although margins continue to disappoint as against our expectation of some improvement, we believe it to rebound going forward on the back of repricing of fixed rate loans (~Rs 60 bn over the next two quarters) and pick up in disbursements to high yielding developer’s portfolio. Besides this reduction in base rate by banks recently would bring down the overall cost of funds going forward. We have revised our estimates downwards by ~8-9 percent considering deterioration in asset quality and lower than expected NIMs during the quarter. We estimate LICHF to report an EPS CAGR of 20.0 percent over FY12-FY14E. ABV is estimated to grow at 15.1 percent CAGR during the same period. We roll our target price to December’ 13 revising our target price to Rs281.2 (Rs278.5 earlier), implying an upside of 13.3 percent from current levels. Thus we retain our Accumulate rating,” says Aditya Birla Money research report.

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