LIC Housing Finance: Sharp decline in NIMs, net profit down 19.4%
- Net Interest Income (NII) registered a decline during the quarter by 11.8% YoY from Rs4203.5 mn in Q4FY11 to Rs3707.7 mn in the current quarter on the back of lower NIMs (decline of ~101 bps on YoY basis). However on QoQ basis margins improved by 17 bps resulting in 13.8% jump in NII. The decline in NIMs on YoY basis was on the back of higher cost of funds and slower disbursement growth in high yielding developer loan portfolio. However, sequentially NCD issue in January and preferential capital allotment to LIC has brought down the overall cost of funds resulting in higher NIMs. The management expects NIMs to improve going forward in FY13 (guidance of 2.7-3.0% in FY13) led by higher disbursement in developers portfolio (target of 10% of the total loan portfolio currently at 5.0%) coupled with repricing of fixed rate loans (Fix-o-Floaty). The company's teaser rate home loan portfolio under Fixed-o-Floaty scheme worth Rs120 bn would get re-priced in the current fiscal.
- Sharp decline in NIMs and subdued growth other income has resulted in 19.4% decline in Net Profit during Q4FY12 despite provision write back of Rs23.9 mn in the current quarter. Sequentially net profit registered a decline of 17.0% despite higher NIMs mainly on the back of higher write back of provision in Q3FY12 (Rs796.9 mn as against Rs23.9 mn in the current quarter). Last quarter, the company has aligned its provisioning policy on Standard Assets / NPA to match with revised NHB norms and consequently the company has reversed the excess provision of Rs788.9 mn (net of provisioning required to be made in the last quarter).
- Outstanding Mortgage Portfolio as on Q4FY12 was Rs630.8 bn as against Rs510.9 bn as on Q4FY11, registering a YoY growth of 23.5% (7.4% QoQ). Total loan disbursements registered a growth of 19.3% (40.2% QoQ) during the quarter mainly led by robust disbursement in the individual’s loan portfolio (growth of 22.0% YoY, 38.9% QoQ). Loan disbursements to developers were Rs2.74 bn as against Rs3.33 bn YoY. Lower disbursal in the developer’s portfolio has consequently lowered the proportion of the developer loan portfolio to ~5.0%. The company is targeting a corporate developer loan book at 10% over next 1-2 year. Going ahead, loan book CAGR of 21.9% is expected over FY12-14E.
Outlook and Valuations
The margins are expected to rebound going forward on the back of repricing of fixed rate loans and higher disbursements to high yielding developers portfolio. Margins are set to improve by 22 bps in FY13E. Added to this release of provisions on teaser portfolio (that will come for repricing) is likely to keep the provisioning expenses low going forward. With stable asset quality LICHF is estimated to report an EPS CAGR of 35.1% over FY12-FY14E. ABV is estimated to grow at 19.0% CAGR during the same period. Going forward, the company is expected to deliver healthy net interest income growth (CAGR 29.2% FY12-14E) and earnings growth (CAGR 35.1% FY12-14E). Aditya Birla Money have slightly increased the target price to Rs285.1 from Rs266.6 earlier, giving an upside potential of 14.1% from current levels, thus changing the rating from Neutral to Accumulate.
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Aditya Birla Money formerly known as Apollo Sindhoori Capital Investments is a leading player in the broking space with nearly 15 years of experience. It became a part of Aditya Birla Group in March 2009, when the group acquired 76% of the company. The Company has a strong distribution network of over 800 own branches and franchisee network, a large customer base in excess of 1,80,000, a strong technology backbone and a range of products delivered through a robust online and offline model. The Company boasts of immense talent pool and vertical specialists which add to its positioning as a major player in this segment.
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