Motilal Oswal's research report on LIC Housing Finance
LICHF reported 1QFY24 PAT of ~INR13.2b (~34% beat), which grew 43% YoY, driven by a healthy NII growth and lower credit costs. NII at ~INR22b (22% beat) grew 37% YoY, while PPOP at INR20b (23% beat) grew 39% YoY. Cost-income ratio moderated to ~11% (PY: ~12%), driven by a sharp NII growth. 1QFY24 NIM (reported) at ~3.2% expanded ~30bp QoQ, driven by a ~15bp improvement in (reported) yields to ~10.2%. The CoF was flat QoQ at ~7.6%. We do not believe that NIMs can be sustained at current levels and model NIM compression (from current levels) for the rest of the fiscal year. The management shared that the ongoing IT platform transformation led to technical glitches, which resulted in a) muted disbursements and b) deterioration in GS3, due to the inability to present NACH mandates. We model NIM of 2.8%/2.7% in FY24/FY25. To factor in the margin expansion reported in 1QFY24, we increase our FY24/FY25 EPS estimate by ~9%/6%. We model an advances/PAT CAGR of 9%/26% over FY23-25 for RoA/RoE of 1.5%/14% in FY25.
Outlook
Muted disbursements and asset quality deterioration was a dampener despite the historically high NIM levels, reported by LICHF. While we hope for the volatility in NIM and ECL provisioning to subside, we still see risk reward favorable at 0.7x FY25 P/BV. We reiterate our BUY rating with a TP of INR500 (premised on 0.8x FY25E P/BV).
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