Buy LIC Housing Finance; target of Rs 435: Sharekhan

Sharekhan's research report on LIC Housing Finance

Despite reporting a strong beat in earnings (PAT at Rs. 1,180 crore, up 6% y-o-y/146% q-o-q), led by higher margins and lower credit cost, business momentum remained weak in terms of retail disbursements for LICHF. Disbursements in the individual retail home loan segment declined for the second consecutive quarter, by 24% y-o-y/ 21% q-o-q. Total disbursements declined by 17% y-o-y /1% q-o-q. Overall loan book grew by 10% y-o-y/2% q-o-q. Individual home loan book grew by 12% y-o-y. Developer book declined by 10% y-o-y but was higher sequentially by 8%, led by higher disbursements (up 224% y-o-y). NIMs positively surprised with 51 bps improvement sequentially to 2.93% on account of repricing of the asset book. Credit cost stood at 45 bps annualised vs. 115 bps q-o-q; however, PCR on GS3 assets declined to 45% vs. 51% q-o-q.

Outlook

Gross Stage-3 assets improved by 38 bps q-o-q to 4.37%; however, gross stage-2 assets were higher by 133 bps q-o-q to 5.25%. Management is confident of recouping GS2 assets in the next quarter and alluded increase in GS2 assets due to technical reasons. At the CMP, the stock trades at 0.7x/ 0.6x its FY2024E/FY2025E BV estimates, respectively. We maintain our BUY rating with an unchanged PT of Rs. 435.

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