October 25, 2016 / 16:44 IST
LIC Housing Finance (LICHF) beat estimates with reported PAT of Rs 4.9 bn (+20% YoY), led by higher NII growth (+21% YoY) and contained provisions (flat YoY despite 500 bps PCR rise). It continued to benefit from a benign interest rate environment, with cost of funds (down 35 bps YoY) decreasing faster than the decline in yields (down 20 bps). Asset quality remained healthy with GNPAs flat at 0.6%.
LICHF is best placed to benefit from reducing interest rate environment (81% of total borrowings from NCDs, fixed and semi-fixed rate loans accounting for 39% of total loans), tailwinds from favourable government policy towards the sector (large exposure to affordable housing finance) and improving share of non-core assets (LAP & Developer loans). Maintain BUY with revised TP of Rs 735.
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