Indiabulls Housing Finance recovers from day's low, brokerages mixed on Q4 show

Indiabulls Housing Finance shares gained 4 percent from its lows on April 25 morning amid mixed views from brokerages after its March quarter results.

The stock was quoting at Rs 752.55, up Rs 3.75, or 0.50 percent on the BSE, at 10:04 hours IST.

The company reported a 7 percent year-on-year degrowth in consolidated profit at Rs 1,001.4 crore, but net interest income grew 5.8 percent to Rs 1,591 crore in quarter ended March 2019, both missing analyst estimates.

CNBC-TV18 poll estimates for profit were at Rs 1,050 crore and NII was likely to be at Rs 1,618 crore for the quarter.

Asset quality weakened during the March quarter. Gross non-performing assets as a percentage of gross advances increased to 0.88 percent against 0.79 percent in previous quarter. Net NPA also was higher at 0.69 percent against 0.59 percent sequentially.

Indiabulls Housing reported a first time decline in loan growth (down 16.6 percent) YoY as well as (down 7 percent) QoQ. Liquidity crisis continued to have an impact on disbursements & loan growth for the housing finance companies.

On the positive side, gross spreads were at 3.42 percent in March quarter against 3.11 percent in same period last year. The company remained strongly capitalised at 26.3 percent with Tier I ratio at 119.7 percent.

Brokerages remained mixed in their opinion after subdued growth in March quarter results.

Brokerage: CLSA | Rating: Buy | Target: Rs 920 | Return: 23%

The rising shares of sell-downs could increase earnings volatility and we disappointed to see slower progress on resolutions.

We have seen pick-up in disbursements but growth is still weak. Lakshmi Vilas Bank merger will allow company to scale up its deposit franchise and hence, company may go slow in real estate lending to comply with norms.

We maintained buy rating with a target price at Rs 920 per share.

Brokerage: Morgan Stanely | Rating: Underweight | Target: Rs 600 | Return: (20%)

Results are broadly in line with estimates. Key statistic to focus on is borrowing growth which shrank 2 percent QoQ and down 13 percent since September 2018.

Tax rate was higher than we expected at 30 percent while bank term loans have expanded, which is a positive sign.

We are underweight on Indiabulls Housing with a target at Rs 600.

Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 800 | Return: 7%

We are comfortable on liquidity front compared to most peers but growth took a hit in March quarter. NII decline was lower as net interest margin expanded 50 bps.

Gross NPAs largely are stable aided by higher write-offs.

We forecast only 5 percent AUM growth in FY20 and cut earnings estimates by 13-16 percent. Hence we slashed price target to Rs 800 from Rs 1,000 earlier while maintaining neutral call on the stock.

Conversion to a bank is key to secure consistent asset growth and regulatory approval for the same is key catalyst for the stock.

Brokerage: Narnolia | Rating: Neutral | Target: Rs 759 | Return: 1%

Due to liquidity management growth of Indiabulls Housing has hampered along with margin pressure. However, it has successfully pass on the rise in cost of borrowings to the customer which will offset some pressure going ahead.

After the Liquidity crisis Management has raised over Rs 50,000 crore via different sources but it has been utilized mainly for repayment of liability and liquidity management. Now as the liquidity is expected to improve company management is confident in revival of the disbursement number & loan book growth at 20 percent range.

On the assets quality front, we remain cautious on developer segment. Owing to the merger news with Lakhsmi Vilas Bank Management has applied various application with the regulatory bodies for which the approval is expected to come through in 2HFY20 or FY21.

We believe in near term price performance of IBULHSGFIN will depend on regulatory approval for merger. Hence, we remain neutral on the stock at Rs 759.