Emkay Global Financial's report on LIC Housing Finance
LICHF’s disbursements declined ~65% yoy (-78% qoq) on a ~68% yoy fall (-72% qoq) in individual housing, while project financing fell ~37% yoy (-91% qoq). Overall loan book grew at a multi-quarter low of 6.1% yoy (-0.4% qoq) and stood at Rs2,098bn. Net interest income rose ~3.3% yoy to Rs12.2bn, with margins improving sequentially to ~232bps from ~218bps last quarter. This was mainly a result of the non-reversal of interest income amid no incremental slippages due to asset-quality standstill. Despite increasing competition, LICHF is optimistic on retaining spreads due to its strong parentage.
We have been cautious on the company’s asset-quality profile for some time, and we remain so due to inadequate provisioning. Though the housing loan book is safer than asset-backed loans in current times, we remain concerned about the pressure emerging on spreads and margins on the introduction of external benchmark-linked floatingrate loans by banks. We keep our estimates largely unchanged and reiterate Hold/EW in EAP, but raise the target price to Rs274 from Rs254 due to the rollover to Sep’22E, corresponding to ~0.7x Sep’22E P/Adj. Book. The key risk is a big fiscal push by the government for reviving of real-estate activity.
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