Accumulate LIC Housing Finance; target of Rs 630: Prabhudas

Prabhudas Lilladher's research report on LIC Housing Finance

LICHF net earnings of Rs4.95bn were above estimates (PLe: Rs 4.82bn) on back of lower loan loss provisions, better NII growth, improving spreads and stable loan growth of 15% YoY. Core retail book growth continue to be slow at 9.6% YoY, but disbursement trends are showing signs of improvement, while company has been able to arrest its pre‐payment rate which was under pressure from high compeition. Competitive landscape continues to be tough which was evident in yield pressures especially in LAP, while LICHF has been able to mitigate pressure benefitting from lower cost of funding. We retain ‘Accumulate’ with revised PT of Rs 630 (from Rs 535), based on 2.4x (from 2.0x) Mar‐18E ABV as we lower our COE.

Asset quality remained stable with GNPAs at 0.57%, up 2bps QoQ and NNPAs at 0.28%, flat QoQ. Individual GNPA saw slight improvement to 0.32% of loans down 3bps QoQ. We do not foresee any asset quality issues from the non‐core mortgage book. Maintain “Accumulate” with revised PT of Rs 630 (from Rs 535).