LIC Housing Finance
Robust growth, deep value
BUY
CMP: Rs364 Target Price: Rs450
We initiate our coverage on LIC Housing Finance (LICHF) with a BUY rating and a price target of Rs450. We believe that LICHF is well equipped to take advantage of the long term growth prospects of the Indian housing finance market. Given its wide distribution franchise to grow the loan book (21% CAGR over FY09-11E), ability to maintain NIMs (2.9% over FY09-11E) and effective risk assessment processes (gross NPAs at low of 0.7% by FY11E), we expect LICHF to report a 20% CAGR in net operating revenues and earnings over FY09-11E. As LICHF leverages its balance sheet and maintains its RoA at 2.0%, we expect it to report a robust RoE of 25%+ over the same period. Looking at its promising growth prospects and RoE profile, we believe that the current valuations at 1.1x FY10E ABV and 0.9x FY11E ABV are attractive.
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