Prabhudas Lilladher's research report on LIC Housing Finance
LICHF saw a mixed quarter; NII missed PLe by 5% due to lower NIM, which was offset by lower provisions at 11bps (PLe 49bps) and higher other income. NIM declined by 5bps QoQ due to focus on growth. As per LICHF, NIM has bottomed out as (1) share of higher yielding NHL in disbursals is targeted to reach 20% by FY25 end, (2) yields in prime/super-prime have increased by 10-15bps, (3) wholesale portfolio growth would be higher, (4) loans would be disbursed to new segment of self-employed individuals priced at a 250bps premium, and (5) loan mix is shifting from HL to higher yielding NHL/NHC. Double-digit loan growth guidance has been maintained for FY25E. However, we factor in 7.5% loan CAGR over FY24-27E due to competition from banks/large HFCs.
Outlook
Given RoA of 1.7%, re-rating would hinge on better loan growth and stable earnings quality, though asset quality is improving. Keeping multiple at 1.0x, we increase TP to Rs 675 from Rs660 and roll forward to Sep’26 ABV. Retain ‘HOLD’.
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