Microsec:LIC Housing Finance Ltd Result Update Nov 21,2014 microsec.in/static/pdf/LIC%20Housing%20Finance%20Ltd.%20Result%20Update.pdf We recommend LIC Housing Finance Ltd. (LICHFL) a BUY. LICHFL is one of the leading players in the Indian mortgage market. The company which has been in existence since 1989 is promoted by “Life Insurance Corporation (LIC)”. The main objective of the company is to provide loans for purchase/construction/repair and renovation of new or existing flats/houses. The company also provides long term finance to the developers who are in the business of construction of houses or flats for residential purpose. Industry Overview The Indian Mortgage markets experienced some moderation in demand in the higher segment. High property prices and high interest rates scenario coupled with slow growth in the economy has resulted in some slowdown in housing demand. However, the mid and small segment housing continues to be in demand. We believe the continued and renewed effort from the Government and the Reserve Bank of India (RBI) to prioritize low cost housing construction may improve the demand of low cost housing, positively impacting LICHF. Also, the industry itself may see revival with the downward reversal of interest rates cycle which seems to be likely. However, with an expectation of economic recovery in near term, Housing finance industry is all set for a strong growth in coming years. Valuation and Recommendation Microsec Research has covered LICHF several times since last 6 years and the stock has seen a sustainable growth and attained appreciation of~ 7x on its stock price. Recently we recommended LIC Housing Finance Ltd. at the price of INR249.90 on August 23, 2012 with a price target of INR317 which has already been achieved. We believe the continued and renewed effort from the Government and the Reserve Bank of India (RBI) to prioritize low cost housing construction couple with company’s strong presence in the sector is positively impacting LICHF. At the CMP of INR411.15, the stock is trading at FY14 P/BV of 2.75x. As per the Bloomberg consensus, the current valuation of 2.44x FY15E and 2.09x FY16E Book Value looks attractive. We recommend a BUY on the stock with a target price of INR472 (2.40x FY16E BV) with an upside of ~15% from the current level with an investment horizon of 12 months.
Posted on: Fri, 21 Nov 2014 09:14:43 +0000
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