Buy LIC Housing Finance; target of Rs 435: Motilal Oswal

Motilal Oswal's research report on LIC Housing Finance

LIC Housing Finance (LICHF)’s 4QFY23 PAT grew 6% YoY at ~INR11.8b (~48% beat) driven by healthy NII growth, decline in the cost-to-income ratio and lower credit costs of ~45bp (annualized; PQ: ~115bp and PY: ~30bp). Its FY23 PAT grew 26% YoY to ~INR29b. NII at ~INR20b (26% beat) rose 22% YoY, while PPOP at INR17.5b (28% beat) grew 16% YoY. Cost-to-income ratio moderated to 13.6% (PY: 14.2%). Its 4QFY23 NIM (reported) at ~2.93% expanded ~50bp QoQ, driven by a ~33bp improvement in (reported) yields to ~10%. The CoF rose ~23bp QoQ to ~7.6%. FY23 NIM stood at ~2.4% (PY: ~2.3%). LICHF has taken an additional retail PLR increase of ~25bp from Apr’23 onwards.

Outlook

We hope that this volatility would reduce going forward with higher predictability in NIM and the provisioning policy. Reiterate BUY with a TP of INR435 (premised on 0.7x FY25E P/BV).

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