Buy LIC Housing Finance; target of Rs 859: Edelweiss

Edelweiss' research report on LIC Housing Finance

LIC Housing Finance’s (LICHF) Q1FY18 PAT, at INR4.7bn ( >up 15% YoY), was lower than estimate on slower revenue traction. The key disappointment was the 47bps QoQ NIMs dip on lower lending yields, a reflection of: a) repricing pressure; and b) interest income reversal (2 corporate accounts of INR1.2bn slipped into NPLs), while funding cost was sticky. While individual disbursements gained traction, up 17% YoY, elevated repayment trend restricted loan growth to 14.4% YoY.

Outlook

The huge opportunity in mortgage segment will help LICHF sustain momentum. The stock trades at 2.5x FY19E P/ABV. Maintain ‘BUY/SP’ with TP of INR859 on 3x FY19E P/ABV.

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