LIC Housing Finance CMP: Rs 487 Target Price: Rs 556 Recommendation: HOLD Operational results below expectations; asset quality improves LIC Housing Finance (LICHF) reported results below expectations on account of lower than expected net interest income. Moreover, higher provision compared to provision write back in last quarter also impacted bottom line performance. PAT increased 5.4% YoY and was flat QoQ. Loan growth stood at 18.0% YoY while disbursements witnessed pick up at 24.5% growth. We believe that LICHF is well placed to capitalize on the growth opportunities with increasing market share. Favorable industry dynamics like low mortgage penetration coupled with increasing affordability are likely to drive the housing demand going forward. We expect 13.0% CAGR in PAT for FY14-FY17E with RoA of 1.4% and RoE of 17.5% for FY17E. At CMP, the stock is trading at 2.55x FY16E and 2.19x FY17E ABV; 15.14x and 12.95x FY16E and FY17E EPS. We have rolled over our valuation to FY17 estimates and have arrived at a target price of Rs 556 (2.5x FY17E ABV); an upside of 14.2% from current levels. We maintain our HOLD rating on the stock.
Posted on: Mon, 19 Jan 2015 04:01:08 +0000
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