January 19, 2017 / 17:32 IST
While higher disbursements and robust spreads boosted the Q3FY17 earnings for LIC Housing Finance (LICHF), the quarter stood mixed bag with non-core assets gaining momentum and provisions being on the higher side. The poor show on non-interest performance (down 34.1% Y-o-Y, 41.3% Q-o-Q) and elevated provisions (up 31.4% Y-o-Y; 49.4% Q-o-Q) led to PAT at INR 4.99 bn that stood tad below our estimates of INR 5.3 bn estimates. Yet PAT reported strong 20% Y-o-Y growth for the quarter.
OutlookGiven the price war and likelihood of tad impact on earnings, we cut our EPS estimates by 2% and thereby trim our target multiple to 2.3x P/ABV FY19E (earlier 2.48x P/BV FY19E) arriving at a target price of INR 700 (earlier 756). While we remain sanguine of stable business growth trends and controlled asset quality and robust earnings visibility, coupled with discounted valuations, we maintain BUY recommendation on the stock. At CMP, the stock is trading at 2.1x FY18E and 1.7x FY19E. Reiterate CONVICTION BUY.
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