Prabhudas Lilladher's research report on LIC Housing FinanceLICHF reported robust 35% YoY growth in NII led by ~17% YoY growth in loan portfolio and improving spreads/margins. Margins improved by 15bp QoQ to 2.56% and is now at its highest level in past three years. Asset quality reported stable trends with Net NPLs increasing by modest 1.5% QoQ though there was an increase in the developer loan NPL. However healthy provisioning (Rs301 mn) vs write‐back last year helped improve coverage ratio further. We believe that LICHF remains on track to report an RoE expansion over FY15‐17E on the back of improving spread, stable asset quality and loan growth trend. We maintain BUY with a PT of Rs520 based on 2.3x FY17E ABV.Asset quality reported stable trend as net NPLs increased by 1.5% QoQ though NPL in the developer loan portfolio increased during the quarter. However higher provisioning still enabled slight improvement in coverage ratio to 46.5%. We expect asset quality trends to improve aided by continuous improvement in LTV ratio, while improved funding opportunities and lower yields may help ease pressure on developers. We maintain “BUY” with PT of Rs520. For all recommendations, click here 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.
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