Buy LIC Housing Finance; target of Rs 490: Sharekhan

Sharekhan's research report on LIC Housing Finance

LICHF reported a strong beat in earnings with PAT at Rs. 1,324 crore up 43% y-o-y/12% q-o-q mainly led by higher than expected margin. However, business momentum continued to remain weak. Disbursements in individual retail home loan segment declined for the third consecutive quarter by 28% y-o-y/ 24% q-o-q. Total disbursements declined by 29% y-o-y / 32% q-o-q. Overall, the loan book grew by 8% y-o-y/1% q-o-q. Individual home loan book grew by 10% y-o-y /1% q-o-q. Developer book declined by 9% y-o-y/ 4% q-o-q and constitutes ~4% of total book. NIMs positively surprised with a 28 bps improvement sequentially to 3.21% on account of repricing of the asset book. Credit cost stood at 52 bps annualised vs. 45 bps q-o-q. GS2 & GS3 assets increased cumulatively by 108 bps q-o-q to 10.70%. PCR on GS-3 was at ~42% vs 45% q-o-q.

Outlook

The management guided that deterioration in asset quality was due to a technical glitch where collection could not happen as demand was not raised and these are transitory in nature. At the CMP, the stock trades at 0.8x/ 0.7x its FY2024E/FY2025E BV estimates, respectively. We maintain our BUY rating with a revised PT of Rs. 490.