EUR 120.00 For Business Accounts Only

MOSL: LIC HOUSING FINANCE (Buy)-Margins surprise positively; Asset quality under pressure

LIC Housing Finance: Margins surprise positively; Asset quality under pressure

(LICHF IN, Mkt Cap USD3.5b, CMP INR485, TP INR580, 19% Upside, Buy)

 

• 4QFY19 PAT increased 17% YoY to INR5.7b (3% beat), driven by better-than-expected margins and lower credit costs, despite a sharp rise in NPAs (+30% QoQ).
• Loans grew 6% QoQ and 16% YoY to INR1.95t with core home loan growth of 10% YoY and 5% QoQ to INR1.48t. Share of builder loan portfolio increased to 6.7% v/s 6.2% a quarter ago and 4.9% a year ago. Management guided for continued growth in the builder loan segment in FY20, as it remains a focus area for the company
• On a calculated basis, spreads improved 20bp QoQ to 1.5% — the best in the past eight quarters. Interestingly, it was driven by 25bp reduction in cost of funds. This resulted in 15% QoQ NII growth v/s 6% loan growth.
• In absolute terms, GNPA increased 30% QoQ (INR6.8b) to INR29.7b, while individual GNPA increased 30%+ QoQ (INR4.7b) to INR20.7b. This was due to slippage from Stage 2 to Stage 3 during the quarter, according to management. Builder loan GNPA in % terms increased to 6.9% v/s 6.1% a quarter ago, while absolute GNPA increased to INR9b v/s INR7b a quarter ago. Two accounts from South India amounting to INR1.5b have turned into NPLs during the quarter. Note that core home loans GNPL ratio stood at 0.9% in 4QFY19 v/s 0.76% QoQ and 0.4% YoY.