Buy LIC Housing Finance; target of Rs 470: YES Securities

YES Securities' research report on LIC Housing Finance

LIC HF delivered substantial earnings beat (PAT of Rs11.8bn v/s est. Rs8bn) driven by sharp NIM expansion and lower provisions, while portfolio growth was in-line with expectation. The large sequential margin expansion of ~50 bps was caused by steep improvement in portfolio yield and measured increase in CoF. The lower credit cost was aided by reduction in Stage-3 assets (partly caused by collections & recoveries) and decrease in its coverage. Though home loan disbursements were weaker than expected (growth was weaker than peers too), the portfolio growth came in-line due to reduction in prepayments/BT Out.

Outlook

While valuation is undemanding at 0.7x FY25 P/ABV, a significant re-rating would be contingent on more confidence around growth and asset quality. Retain BUY with 12m PT of Rs470.