MOSL: LIC HOUSING FINANCE (Downgrade to Neutral)-Core retail growth remains moderate at <10%YoY
​LIC Housing Finance: Core retail growth remains moderate at <10%YoY; Valuation limits upside
(LICHF IN, Mkt Cap USD5.3b, CMP INR676, TP INR723, 7% Downgrade to Neutral)
- LIC Housing Finance (LICHF) reported 4QFY17 PAT of INR5.3b (+18% YoY), in line with our estimate. The quarter was characterized by stable loan growth, a continued increase in share of LAP/builder loans and stable asset quality.
- Loan book growth was 15.5% YoY (6.8% QoQ), in line with the trend witnessed over past 5-6 quarters. Growth continues to be driven by the non-retail portfolio (65% YoY growth in LAP and 60% in builder loans). Disbursements in LAP were INR45b (+18% YoY), while those in builder financing were INR12b (+93% YoY). The QoQ increase in the LAP book was the highest ever at INR41b.
- In line with the trend of past few quarters, the individual home loan book continues to grow at a modest pace of 9.1% YoY, driven by ~11% disbursement growth.
- Margins (calculated) continued their upward trajectory, improving 11bp QoQ to 2.97%, driven by 46bp reduction in cost of funds (calculated). Margins are the highest in past 24 quarters. We expect spreads to remain largely stable at these levels, with lower yields in home loans offset by higher share of non-core loans and continued reduction in cost of funds. We believe cost of funds can decline further from 4QFY17 levels (8.37%).
LIC Housing Finance provides loans for purchase, construction, repairs and renovation of houses and flats to individuals, corporate bodies, builders and co-operative housing societies. Co.'s subsidiary is engaged in the business of setting up, running and maintaining assisted living community centre and care homes for senior citizens.
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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