Buy GIC Housing; target Rs 160: Sunidhi Securities
Sunidhi Securities is bullish on GIC Housing Finance (GICHFL) and has recommended buy rating on the stock with a target price of Rs 160 in its February 19, 2013 research report.
February 20, 2013 / 13:34 IST
Sunidhi Securities is bullish on GIC Housing Finance (GICHFL) and has recommended buy rating on the stock with a target price of Rs 160 in its February 19, 2013 research report.
"GICHFL, was incorporated as 'GIC Grih Vitta Limited' on 12th December 1989. The name was changed to its present name in November 1993. It was formed with the objective of entering in the field of direct lending to individuals and other corporates to accelerate the housing activities in India. The primary business of GICHFL grants housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes. GICHL was promoted by GIC India and its erstwhile subsidiaries namely, National Insurance Company, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company together with UTI, ICICI, IFCI, HDFC and SBI, all of them contributing to the initial share capital.During FY12, GICHL registered 29% higher total income of Rs 439 crore. Net profit fell 48% to Rs 59 crore. EPS stood at Rs 10.2. A dividend of 45% was paid. The impact on profitability is due to newly introduced provisioning requirements for "standard assets" and upward provisioning requirements for all categories of NPA assets. The additional provision charged for the purpose of complying with the said newly introduced provision for "standard assets" and for NPA accounts were Rs 19.3 crore.During FY12, the loan approvals were Rs 1073 crore, a rise of 8%. The Net Non-Performing Assets (NPA) as on 31st March, 2012 was "NIL" as against 0.41% for the previous year. Gross Non Performing Assets as at 31st March, 2012 stood 2.08% as against 2.78% for the previous year. Capital Adequacy Ratio as at 31st March, 2012 was 14.80% as against the minimum requirement of 12%. Retail Housing loan portfolio registered a growth of 13.44%. Retail Housing loan portfolio as on 31st March, 2012 was Rs 3864 crore as against Rs 3406 crore in FY11. During Q3FY13, net profit rose by 90% to Rs 23.2 crore on 24% higher income of Rs 139 crore. EPS for Q3FY13 stands at Rs 4.3. During 9MFY13, net profit advanced by 75% to Rs 58.4 crore on 28% higher income of Rs 407.0 crore. 9MFY13 EPS works out to Rs 12.7 Vs Rs 7.3 in 9MFY12.It is estimated that the housing finance industry will be able to maintain a higher growth in fresh origination of residential home loans over next three to five years mainly due to increased affordability of the borrowers i.e. mainly due to demand for affordability housing projects. The evolution of the Indian real estate sector has been phenomenal since 2000, propelled by a growing economy, liberalized foreign direct investment policy and the higher yields the sector is offering. The Information Technology boom also had a huge impact on the real estate sector. Over the next few years, the sector will grow at the steady pace of 12-18% a year approximately. The change is across the board- in the players who define the market and the customer who are driving demand.The fundamentals of GICHFL are improving after it is witnessing a declining trend in the cost of fund considering the fund mix. Earlier it was dependent on bank borrowings. Recently it raised Rs 125 crore from the bond market at 9.45%. Its NIMs is at 2.7% and making every effort to enhance the NIM. With the opening up of ECB and the bond market penetration, GICHFL expects to improve the NIM to 2.8% going forward.Recently, GICHFL has opened branches at Gurgaon, Indore & Kolhapur. This would further boost the disbursement growth. Rapid expansion of branches over the next few years is a key to sustain the future growth momentum. The strong housing industry outlook and low cost of funds coupled with decreasing cost of fund spell bright prospects for GICHFL. At the CMP of Rs 124, the share is trading at a P/E of 6.9x and P/ABV of 1.1x on FY13E and a P/E of 5.8 and P/ABV of 0.9 on FY14E. We recommend BUY with a target price of Rs 160 at which the share will trade at P/AB of 1.2 on FY14E," says Sunidhi Securities research report.Shares held by Mutual Funds/UTI Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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