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Research
LIC Housing Finance - 2QFY2016 Result Update - Angel Broking
Posted On : 2015-10-21 01:21:04( TIMEZONE : IST )
For 2QFY2016, LIC Housing Finance (LICHF) reported an earnings growth of 20.6% yoy with healthy growth of 34.1% yoy in net interest income, led by healthy growth in loan book and declining cost of funds.
Healthy growth in Advances and NIM
LICHF's loan book grew at a healthy pace of 17% yoy to Rs. 1,14,069cr during 2QFY2016. Loans to the Individual segment which constitute 97% of the total loan book grew by 17% yoy. Total disbursements growth was of around 17% yoy, Loans to the developer segment which has been witnessing a decline or flattish growth over the past eight quarters, grew by 25% yoy to Rs. 2,992cr. Margins during the quarter were at 2.56% as compared to 2.23% in the corresponding quarter of the previous year. A significant decline in the cost of funds to 9.29% as compared to 9.68% in the corresponding previous year period as well as incremental yields for the quarter along with increase in floating rate loans to 35% of the total loan portfolio aided the company in registering a healthy growth in the NIM by 33bp yoy to 2.56%.
On the asset quality front, the Gross NPA ratio (0.60%) and the Net NPA ratio (0.32%) remained more or less constant for the quarter. While provisions appear higher on a yoy basis as there as there was a provision write-back in 2QFY2015, they have fallen by 32% on a sequential basis.
Outlook and valuation: For companies like LICHF, the funding environment has eased; thus it will lead to lower cost of borrowing, while outlook for growth in retail housing loans remains positive, going forward. We expect the company to post a healthy loan book CAGR of 18.7% over FY2015-17E, which is likely to reflect in an earnings CAGR of 20.5%, over the same period. The stock currently trades at 2.4x FY2017E ABV. We recommend a Buy rating on the stock, with a target price of Rs. 571.
Shares of LIC HOUSING FINANCE LTD. was last trading in BSE at Rs.473.15 as compared to the previous close of Rs. 477.5. The total number of shares traded during the day was 175634 in over 4098 trades.
The stock hit an intraday high of Rs. 483.6 and intraday low of 471.6. The net turnover during the day was Rs. 83725207.
