LIC Housing Finance reported strong earnings (Profit before tax/PBT up 18% yoy) on the back of lower provisions.

Chirag Batavia • Nov 24, 2020

LIC Housing Finance

• 2QFY21: LICHF reported strong earnings (Profit before  tax/PBT up 18% yoy) on the back of lower provisions.  Profit after tax (PAT) was up 2% yoy, due to a lower tax  rate in the base

• In2QFY21, loan book was up 5% (on the back of 5%  growth in home loans), LICHF reported 22% growth in  home loan disbursements in September followed by
38% growth in October

• The company had reported about 25% moratorium  book in 1QFY21; LICHF highlighted that its collection  efficiency in the non-moratorium book was 96% (up
from 90% in 1QFY21)

• LICHF’s tier-1ratio is low at 12.3%with leverage of 12X  in March2020 which is close to regulatory cap, this is  higher than most peers and may hence need to raise  capital to support higher growth that will lead to risk  of dilutionbelowbook

• LICHF trades at an inexpensive valuation of 0.8x FY22  expected book value.We value it at 0.8x September  2022E book value with fair value of Rs.400

LIC Housing Finance: BUY
Dated: 23rd November 2020
CMP: Rs.328
Fair Value: Rs.400
Potential Upside: 22%
Time Frame: 12 months

Note:  The above is a brief note on the company, based on the inputs of KIE research report dated 12th November,  2020, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.
Disclaimer: http://bit.ly/2n5AxIE


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