Buy LIC Housing Finance; target of Rs 460: Motilal Oswal

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Motilal Oswal's research report on LIC Housing Finance

LICHF reported 2QFY23 PAT of INR3.05b, which grew 23% YoY (but declined 67% QoQ), driven by NIM compression of ~75bp QoQ, elevated cost-income ratio of ~22% (PQ: 12%), and annualized credit costs of ~90bp.  2QFY23 NII at INR11.6b was flat YoY (down 28% QoQ), while PPoP at INR9.45b was also flat YoY (but down 35% QoQ). 1HFY23 PAT stood at INR12.3b and grew 207% YoY (PY: INR4b). Disbursements for 1HFY23 stood at INR320b and grew ~29% YoY. We have cut our FY23/FY24 EPS estimate by ~13%/6%, respectively, to factor in higher opex, lower NII, and elevated credit costs in FY23. We remain wary of slippages from restructured loans, which can keep credit costs elevated and also result in interest income reversals in 2HFY23.

Outlook

LICHF reiterated its guidance of a YoY improvement in NIM in FY23. We model an advances/PAT CAGR of 11%/25% over FY22-24 for a RoA/RoE of 1.2%/13%. We reiterate our Buy rating with a TP of INR460 (0.9x FY24E P/BV).

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LIC Housing Finance - 03-11-2022 - moti