Motilal Oswal is bullish on Indiabulls Housing Finance has recommended buy rating on the stock with a target price of Rs 900 in its research report dated February 01, 2019.
Motilal Oswal's research report on Indiabulls Housing Finance
PAT declined 15% YoY (-6% QoQ) to INR9.9b (3% miss) in a quarter characterized by tepid loan growth and stable asset quality. Management adopted a cautious stance on disbursements, which were at INR39b. AUM grew 16% YoY to INR1.24t. However, IHFL sold down loans worth ~INR120b in the quarter and booked income of ~INR5.5b on the same. Management guided for 20-25% of AUM growth and 10-15% balance sheet growth over the near term. Incrementally, loan assignments will be a key source of generating and maintaining balance sheet liquidity. IHFL reduced its exposure to sub-3 month CPs - it was down from 12% to 3% YoY. Management targets to limit its share to 5% of total borrowings. Asset quality was stable, with stage 3 loans at 79bp and coverage ratio of 25%. Credit costs of INR3.08b came in higher than our estimate of INR750m, as the company made one-time provision of INR3.3b on its Supertech exposure, although it is a standard asset. In addition, the Palais Royale project, which is an NPL, has witnessed initial signs of recovery - IHFL received INR2b in Jan'19 and expects a similar amount annually over the next four years.
However, AUM growth has come off significantly and the recovery is expected to be very gradual. We expect 14% AUM CAGR over FY19-21. PAT run-rate could be volatile, given the lumpy nature of upfronting of assignment income. We cut our estimates by up to 5% for FY19/20. Maintain Buy with a TP of INR900 (1.8x Dec'20E BVPS).
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