Hold LIC Housing Finance; target of Rs 200: ICICIdirect.com

ICICIdirect.com report on LIC Housing Finance

"LIC Housing Finance's (LICHF) results were largely in line with estimates. The absolute GNPA increased by Rs 93 crore QoQ to Rs 704 crore while NNPA increased by Rs 77.5 crore QoQ to Rs 441.9 crore mainly due to a Rs 132 crore default from a single account - HIRCO. About four accounts are liable for total outstanding GNPA of Rs 369 crore in the developer loan category. The management has indicated that they hold collateral of more than 2x on all these NPA accounts and expect to recover money by Q1FY15E. Also, they have guided that majority of stress in asset quality has been accounted in books but we remain cautious and factor in GNPA of Rs 800 crore and NNPA of Rs 488 crore for FY15E. NIM continued to linger at the bottom level of 2.2 percent. We believe modest NIM of 2.2-2.3 percent is here to stay for long as CoF is elevated and developer credit is sluggish. LICHF has grown credit aggressively at 26.7 percent CAGR over FY06-13, which is moderating while even spreads are under pressure. Also, in a slowing economy, a surge in housing finance growth at industry level is worrying. We recommend HOLD rating with a TP of Rs 200 (1.2x FY15E ABV)," says ICICIdirect.com research report.

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