Mr. Gaurav Jani - Research analyst at Prabhudas Lilladher Pvt Ltd.
- Loan growth was a beat; higher share of fixed rate liabilities could support NIM.
- Stage-3 saw a QoQ blip; focus is on recoveries to improve GNPA.
LIC Housing Finance (LICHF) saw a mixed quarter with a beat on disbursals and loan growth although PPoP and PAT were a miss led by higher opex and provisions. Retail HL continues to drive credit flow with share in closing loans at 82% (vs 78% a year ago). Demand outlook remains healthy despite rising rates and company guided that disbursals could grow by 12-15% in FY23 while share of builder loans could reach 7-8% by FY23 end. Higher proportion of fixed rate liabilities coupled with floating rate loans could support margins. Stage-3 saw a blip, rising by 32bps QoQ and ~45% of the quantum rise was led by slippages from the OTR pool. Focus remains on shoring up recoveries which may aid in stress reduction. As we raise FY23/24 earnings by ~4% we slightly raise multiple to 1.1x FY24 ABV and TP to Rs450. Retain BUY.
Earnings miss led by a miss on core metrics and higher provisions: NII was slightly lower at Rs16.2bn (PLe Rs16.6bn) due to softer NIM as loan growth was tad higher at 10% YoY. Disbursals were stronger at Rs152bn (PLe Rs135bn) while repayments at Rs106bn too were ahead (PLe Rs100bn). Other income was lower at Rs0.3bn. Opex was a miss at Rs2bn (PLe Rs1.64bn) led by higher commissions, employee cost and other opex. Hence, PPoP was lower at Rs14.5bn (PLe Rs15.4bn) led by a miss on NII and higher opex. Provisions were sharper at Rs3.0bn (PLe Rs2.4bn) as stage-3 was higher and increased by 32bps QoQ to 4.96%. PCR dipped QoQ from 43.3% to 40.4%. Thus, PAT was below estimates at Rs9.25bn (PLe Rs9.8bn).
Credit momentum may sustain: 98% of disbursals were attributable to individual and retail home now contributes 82% to loans (vs 78% a year ago). Disbursals were better as housing demand was robust driven by healthy economic environment and the company witnessed strong demand in south-eastern, western and southern regions. Despite rate hardening, demand for the housing continues to be robust as property rates are stable. Management guided for 12-15% YoY growth in disbursals for FY23 while individual disbursals might also see a similar growth. Outlook on construction finance is better and current share which is 5% which may improve to 7-8% by year end.
Higher share of fixed rate liabilities to support margins: 60% of liabilities are fixed rate while 95% of assets are floating. With the company raising PLR by 60bps w.e.f. Jul'22, benefit from rising yields would outpace the increase in funding cost. On asset quality, 40-45% of rise in absolute stage-3 was led by slippages from restructuring. OTR reduced from Rs78bn to Rs30bn (coverage of 10%) which would come up for repayment in next 2-3 quarters. Focus is on collections and the management expects GNPA to reduce over the next few quarters as recoveries may surpass slippages. Segmental GNPA is as follows: individual home loans - 1.9%, non-individual home (incl. commercial) - 10% and project loans - 35%.
Shares of LIC Housing Finance Limited was last trading in BSE at Rs. 372.35 as compared to the previous close of Rs. 385.35. The total number of shares traded during the day was 129620 in over 3582 trades.
The stock hit an intraday high of Rs. 389.70 and intraday low of 369.60. The net turnover during the day was Rs. 48808398.00.