Buy LIC Housing Finance; target of Rs 435: Sharekhan

Sharekhan's research report on LIC Housing Finance

LICHF reported PAT at Rs. 480 crore (down 37% YoY/ up 58% q-o-q), which significantly lagged consensus and our estimates mainly led by higher credit costs. Credit cost stood at 115 bps annualized versus 87 bps q-o-q and 59 bps y-o-y. Company guided that there were no incremental write offs during the quarter however, higher credit cost is attributable towards shoring up the PCR to 51% versus 44% q-o-q. NIMs improved by 62 bps q-o-q and were stable y-o-y at 2.42%. However, there were no positive surprise in terms of margin uptick sequentially as improvement in NIMs was on expected lines due to certain one-off items that had compressed NIMs during the last quarter. We believe margins are expected to improve from hereon as a 115 bps rate hike taken in September and 35 bps rate hike taken in December will be fully reflected going forward which should lend support to the NIMs. Disbursements in individual home loan segment & non home loan segment declined by 11% y-o-y and 4% y-o-y respectively, while non-individual projects loan disbursements grew by 46% y-o-y. Total disbursements declined by 9% y-o-y /4% q-o-q. Overall loan book grew by 10% y-o-y/3% q-o-q. Individual home loan and non-home loan book grew by 14% y-o-y and 3% y-o-y respectively while developer book continued to decline by 23% y-o-y.

Outlook

Asset quality outlook remains stable. Gross Stage-2 assets declined by 8 bps q-o-q to 3.92%. GS3/NS3 asset ratio improved by 14 bps/36 bps q-o-q to 4.75%/2.40%, respectively. At the CMP, the stock trades at 0.8x/ 0.7x/ 0.6x its FY2023E /FY2024E/ FY2025E BV estimates, respectively. We maintain our Buy rating with an unchanged PT of Rs. 435.

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