YES Securities' research report on LIC Housing Finance
Overall disbursements stood 35% higher over Q1 FY24 at Rs147bn, marking stabilization of branch operations on newly introduced tech/system changes. The bounce-back in originations was driven by HL and NHI (LAP) segments as new business activity in project finance and NHC segments remained low. Portfolio run-off was higher during the quarter owing to larger write-off (~Rs14-15bn incl. interest which was a part of EAD), arrear collections (bucket/Stage-2 improvement), NPL recoveries, prepayment on a project loan and increase in BT Out. Annualized lumpsum prepayment rate for H1 FY24 stood at 10.3% v/s 9.6% in Q1. Management has retained its expectation of delivering 12%+ loan growth in the year which implies an ask of 5%+ qoq growth in H2 FY24. Sanctioning activity has been significantly higher from September and the disbursement to sanction ratio is expected to improve too on account of improved TAT after the tech changes. Special rates/pricing offers were given to customers during the festive period. Monthly disbursements are now trending above Rs50bn, and the co. hopes to deliver a positive yoy growth in disbursements from Q3 FY24.
Outlook
In the medium-term, a combination of 10-12% growth, reduced risk on the BS (share of HL having substantially increased) and plausible 13-14% RoE delivery can re-rate valuation towards 1.1x 1-yr rolling fwd. P/ABV. Retain BUY with enhanced 12 PT of Rs575.
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