Buy LIC Housing Fin; target of Rs 300: Motilal Oswal

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Buy LIC Housing Fin; target of Rs 300: Motilal Oswal

Motilal Oswal is bullish on LIC Housing Finance and has recommended buy rating on the stock with a target of Rs 300 in its February 1, 2012 research report.

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Motilal Oswal is bullish on LIC Housing Finance and has recommended buy rating on the stock with a target of Rs 300 in its February 1, 2012 research report.

"LIC Housing Finance (LICHF) posted strong PAT growth of 43% YoY (three-fold QoQ) in 3QFY12 to INR3.06b, much higher than our estimate of INR2.35b, on the back of provision write-back of INR797m. Adjusted PAT was 10% lower than our estimate at INR2.26b."

"Loan book grew at a healthy 27% YoY and 5% QoQ to INR587b. Individual loan portfolio grew strongly by 33% YoY (and 6% QoQ) to INR551b (~94% of total loan book), while builder loan portfolio continued to decline (down 27% YoY and 12% QoQ). Disbursements grew 2% YoY (and 8% QoQ) to INR47.2b, led by a steep 63% YoY as well as QoQ decline in disbursements to builders to INR1.54b. Disbursements to individual borrowers increased 8% YoY to INR45.7b. Despite strong asset growth (26% YoY and 5% QoQ), NII declined 8% YoY (3% QoQ) to INR3.3b. NIM declined 18bp QoQ to 2.27%, driven by higher cost of funds & flattish yields due to decline in developer loan portfolio. Asset quality remained largely stable, with GNPA up 2% QoQ to INR3.7b. In percentage terms, GNPA remained steady at 0.63% v/s 0.64% in 2QFY12. PCR declined sharply to 51% from 82% in 2QFY12 due to write-back of excess provisions on balance sheet. LICHF wrote back excess provisions to the tune of INR1.06b. Adjusting for the provisions to be made during the quarter, the net write-back stood at INR797m."

"We have tweaked our earnings estimates to factor in lower than expected margin performance and the write-back of excess provisions during the quarter. The stock trades at 2.4x FY12E BV and 2x FY13E BV. We maintain Buy, with a price target of INR300," says Motilal Oswal research report.

Institutional holding more than 40% in Indian cos           

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To read the full report click on the attachment