Sharekhan's research report on LIC Housing Finance
LICHF reported weak performance in Q2FY2023 with PAT at Rs. 305 crore (up 23% YoY/down 67% QoQ), 63% below estimates, driven by weak NII, higher opex growth, and higher-than-estimated credit costs. NII was flat YoY/down 28% QoQ. NIM declined by ~20bps YoY and ~75bps QoQ to ~1.8% in Q2FY2023 mainly due to a) modification loss of ~Rs. 275 crore booked, as upfront reduction in interest rate was given by the company to convert some of the fixed rate retail assets to floating rate, b) reversal of interest income on NPLs – ~Rs. 95 crore, and c) lag in repricing of the book compared to increased COF. Higher opex (flat YoY/up 29% QoQ) coupled with weak NII momentum led to weaker PPoP (flat YoY/down 35% QoQ). Credit cost stood at 86 bps (as a % of loans) vs. 48 bps QoQ. Gross Stage-2 and Stage-3 assets increased by ~4%/1% QoQ during the quarter. GS3/NS3 improved by 6bps/20bps QoQ to 4.90%/2.76%, respectively, while PCR on Stage-3 assets improved by ~330bps QoQ to ~44%.
Outlook
At the CMP, the stock trades at 0.7x and 0.6x its FY2023E and FY2024E BV, respectively. We maintain our Buy rating with a revised PT of Rs. 435.
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