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Emkay Global Financial Services is bullish on LIC Housing Finance and has recommended accumulate rating on the stock with a target of Rs 1490 in its October 14, 2010 research report.
?LIC Housing Finance (LICHF) has reported strong 63% growth in NII at Rs 3.1 billion driven by 36% growth in advances and 35bps expansion in spreads. Stable spreads/NIMs are positive surprise ?. The growth in sanctions to individuals remained strong at 28% yoy, although the D/S ratio was lower at 67% due to as LICHF funded mostly under construction properties ? The asset profile improved as the gross NPAs were down by 22% yoy and net NPAs were down 54% yoy. The gross and net NPAs stood at 0.7% and 0.1% respectively.?
?LICHF has strong growth in the balance sheet has resulted in pressure on the employee costs, the same has been mitigated by lower establishment and advertisement expenses. With Opex controlled at 13% of the net income, the operating profit grew by 59.6% yoy. The asset quality remained robust as the gross and net NPAs stood stable at 0.7% and 0.1% of advances compared with 1.3% and 0.6% in Q2FY10. On yoy basis, the gross and net NPAs have declined by 22% and 50%.?
?As we had highlighted earlier, the growth numbers have picked up and likely to go even higher in Q3FY11. Valuations at 2.7x FY12E ABV look expensive in short term. However, strong balance sheet, earnings growth keep long term story intact. Maintain ACCUMULATE with 18-mth target price of Rs 1490 valuing stock at 2.5x of average ABV for FY12E/FY13E,?
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