MOSL: INDIABULLS HOUSING FINANCE (Buy)-Strong growth, stable performance overall
​Indiabulls Housing Finance: Strong growth, stable performance overall
(IHFL IN, Mkt Cap USD7.6b, CMP INR1343, TP INR1550, 15% Upside, Buy)
- Indiabulls Housing Finance's (IHFL) PAT grew 26% YoY to INR8.6b (4% above our estimate). Core operating performance was robust, with strong AUM growth (+33% YoY) and stable spreads. However, other income (income from the liquid investment book) remains subdued due to lower incremental yields. Note that IHFL had generated a good spread on its investment book above cost of funds in FY16 and FY17 - that is beginning to vanish now.
- AUM growth was in line with trend at 33% YoY to reach INR1t. This was driven by 36% YoY growth in disbursements to INR95b. Management is bullish on pick-up in supply in the affordable housing space.
- Despite competitive pressures, IHFL managed to hold spreads steady at 3.25%. Management continues to guide for incremental spreads in the range of 2.75-3% and book spreads of 3-3.25%. Incremental cost of funds is around 7.3-7.5%.
- The share of home loans in the overall book inched up 100bp to 58%. With the share continuously inching up (to the target of 66% by FY20), we believe spread pressure will continue.
Indiabulls Housing Finance is a housing finance company, provides home loans, loan against properties, and commercial vehicle loans primarily to salaried and self employed sectors in India. Co. offers loans against residential and commercial properties to small to mid-sized businesses, partnership firms, and private limited or closely held companies; and commercial loans, including new vehicle loans, used vehicle/refinance, top up loans, and balance transfers to various business owners. It also provides financial related advisory services and other related ancillary services; and sells insurance products.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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