Elara Securities Analysis and Recommendation for LICHF (LIC Housing Finance)

Elara Securities Analysis and Recommendation for LICHF (LIC Housing Finance)

VoM News Desk | February 6, 2024 | 12:47 PM IST | Breaking News | Follow on Google News

Elara Securities Analysis and Recommendation for LICHF (LIC Housing Finance)

Elara Securities Analysis and Recommendation for LICHF (LIC Housing Finance)

Rating: HOLD

Target Price: ₹540

Key Insights:

1. Mixed Quarter for LICHF:

• PAT beat by 7.3% to PLe (Projected Estimates) due to higher NII/NIM.
• Loan growth remains muted at 4.8% YoY.
• Expectation of a 10-15bps YoY compression in FY25E NIM due to tight liquidity.

1. Concerns and Challenges:

• Loan offtake has been weak due to tech change and efforts to enhance back-office capabilities.
• Stiff competition from banks, especially in prime housing, could impact loan growth.
• Loan CAGR projected at 7% over FY24-26E due to competitive intensity.

1. Positive Margins but Caution on Growth:

• NII beat expectations, driven by better NIM at 3.06%.
• Lower funding cost contributed to superior NIM.
• Caution expressed on loan growth and NIM due to competitive intensity.

1. Asset Quality and Provisions:

• Stage-2/stage-3 decreased QoQ by 53/7bps to 4.5%/4.3%.
• PCR improved from 41.2% to 48.6% QoQ due to ECL transfer from stage-2 to stage-3.
• Provisions were higher at ₹4.4bn.

1. Outlook and Guidance:

• Disbursals were muted due to technology implementation and organizational changes.
• Improvement expected in disbursals for FY25 after resolving tech issues and enhancing operational capability.
• Competitive intensity from banks may impact loan CAGR, projected at 7% over FY24-26E.
• NIM guidance indicates a potential fall post FY24, with a focus on recoveries.

1. Valuation and Target Price:

• Multiple adjusted from 0.9x to 1.0x on Sep’25 ABV.
• Target Price increased from ₹460 to ₹540.

Summary:
While LICHF reported a mixed quarter with positive margins, the cautionary stance on loan growth and NIM due to competitive intensity is emphasized. The challenges in disbursals due to technology changes and organizational restructuring are expected to improve, leading to enhanced disbursals in FY25. The rating is ‘HOLD,’ and the target price is adjusted to ₹540, considering the evolving dynamics and competitive landscape in the housing finance sector.

VoM News Desk

VoM News is an online web portal in jammu Kashmir offers regional, National & global news.