Thursday, January 20, 2011

LIC Housing Finance Company Update; Valuations comfortable; upgrade to BUY; Target: Rs 210

LIC Housing Finance

Reco: BUY

CMP: Rs174

Target Price: Rs210

Valuations comfortable; upgrade to BUY

·      Recent increases in the lending rates to take care of NIMs atleast for next two quarters. We are already building in 20bps pressure in spreads/NIMs next year

·      Developers' loan portfolio only on pause now, to start disbursing fresh loans from Q4FY11 onwards. The proportion of developers' loan to remain steady at 11% of total

·      Developers' loans portfolio NPAs are minimal. The loans under investigation at Rs3.9bn which are all performing assets

·      Valuations at 1.7x/1.4x FY11E/FY12E ABV – valuations attractive looking at 22% avg RoEs despite higher provisions and building lower NIMs. Upgrade to BUY with TP of Rs210

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