Buy LIC Housing; target of Rs 490: P Lilladher

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Prabhudas Lilladher's report on LIC Housing Finance

"LICHF’s Q3FY15 operating performance was in-line with expectations as NII grew 20% YoY to Rs5.49bn (Ple: Rs5.57bn) while total income stood at Rs6.17bn (PLe: Rs6.2 bn). Loan growth stood at 18% YoY led by steady trends in individual disbursements while LAP portfolio grew at ~100% YoY constituting ~4% of total loans. Spreads remained flat on QoQ basis however management suggested that incremental spreads are ~30bp higher and are likely to improve further."

"Asset quality improved led by 9% QoQ reduction in Gross NPLs in individual loan segment while it remained stable in developer loans. LICHF expects asset quality trends to improve going further and improved funding opportunities and lower yields may help ease pressure on developers. LICHF has delivered ~46% return over past six months and we expect re-rating to continue on the back of improving spreads and RoE. We maintain BUY rating with PT of Rs 490 based on 2.3x Sep-2016 ABV", says Prabhudas Lilladher research report.

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