FREE

MOSL: Morning India (15/October/18): 1. LIC Housing Finance (Upgrade to Buy); 2. Hindustan Unilever (2QFY19); 3. CESC; 4. Avenue Supermart; 5. AU Small Finance; 6. Fund Folio (Indian Mutual Fund Tracker); 7. Ec

MOrning India (15/October/18): 1. LIC Housing Finance (Upgrade to Buy); 2. Hindustan Unilever (2QFY19); 3. CESC; 4. Avenue Supermart; 5. AU Small Finance; 6. Fund Folio (Indian Mutual Fund Tracker); 7. EcoScope; 8. Healthcare

 

Today’s top research idea

LIC Housing Finance: Parentage and access to debt capital key moats; Minimal downside risks to earnings; Valuations attractive at 1.3x FY20 PB

• Over the past 1-2 years, LICHF has experienced spread pressure and slowing growth. We believe the scenario is slowly reversing. LICHF has INR216b/ INR222b of NCDs maturing in FY19/ FY20. These NCDs bear a relatively high weighted average cost of 8.46% and 8.32%, respectively. If these NCDs are refinanced at 9.0%, the weighted average cost of funds would increase only 15-20bp each year. On the other hand, LICHF has taken four yield hikes adding to 60bp across the entire loan book over the past six months. This will more than offset the increase in cost of funds over the next two years.
• Our bear-case sensitivity reveals that even if maturing NCDs are refinanced at 9.5%, impact on FY19/20E PBT would be only 3%.

Piping hot news

Government may not further hike import duty on non-essential items

• The government may not go for another round of import duty hike on any more items and could take other measures to contain the impact of rupee slide on current account deficit (CAD), an official said. The government, within a span of two weeks, has hiked import duty on a host of household items like refrigerators and air conditioners, and telecom and communications system products as it looked to cut import of non-essential items.