Accumulate LIC Housing; target of Rs 330: Sushil Finance

Sushil Finance is bullish on LIC Housing Finance (LICHFL) and has recommended accumulate rating on the stock with a target of Rs 330 in its December 19, 2012 research report.

“LICHFL is 2nd largest player in Housing Finance Industry with a market share of 11%, and is augmenting its position for increasing its market share in highly competitive home financing space. Also better and controlled focus on a single market gives it a competitive edge over Banks. Management foresees strong demand scenario over the next 7 years considering the supply gaps and under penetration for financing affordable housing, despite of some pockets remaining soft. It has strong pan India presence with 193 offices and +10,000 agents to extend its marketing reach with strong brand recognition of its parent LIC.”

“LICHFL has come a long way in improving its asset quality. Overtime LICHFL has shifted its loan mix to individual loans (o/w 90% salaried class) and reducing exposure to project loans which has helped to improve its asset quality significantly. Its Gross NPAs has reduced from 4.4% in FY05 to 0.4% in FY12 on back of strong recoveries, stringent approvals and quality collateral which induces confidence in high standard of asset quality (standing now in line with HDFC), although stress may increase due to increase in project loan portfolio. Going ahead, we expect asset quality to remain healthy on more than required provisioning policy prescribed by RBI and adequate collaterals; we also note that provision cover remains reasonably high at ~160% (including teaser & standard asset provisioning) and as teaser loan product starts resetting, provisions on these should start releasing in Q1FY14, which would help credit costs to remain lower ahead.”

“LICHFL has grown at healthy pace in a past few years driven by strong growth in loan book along with improved asset quality and high return ratios. Going forward, we believe its loan book could grow at 23% & 22%, while NII could grow at 25% & 42% in FY13E & FY14E respectively. Asset re-pricing coupled with strong disbursement growth to result in reversal of NIMs which in turn would lead to PAT growth of 21% in FY13E & 43% in FY14E. On back of overall growth in the housing finance industry, consistent good performance, strong comfort in asset quality & the positive fall out of capital raising plan are the key value drivers. At CMP, the stock trades at attractive valuation of 2.2x FY13E ABV & 1.8x FY14E ABV. We are initiating our coverage on LICHFL with an accumulate rating and a target price of Rs.330 (based on 2.1x ABV),” says Sushil Finance research report.

Institutional holding more than 40% in Indian cos 

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

Read More