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☑ Change in Estimates | ☑ Target | Reco Weak loan growth and developer loan concerns continue to remain an
overhang on the stock
Change in Estimates
Current Previous
Tepid performance continues for LICHF with weak NII traction as loan growth
FY19E FY20E FY19E FY20E
Rating ACCUMULATE ACCUMULATE and margins stood lower. However, earnings at Rs 5.7bn stood higher than
Target Price 637 649 estimates (PLe: Rs 5.5bn) with benefits emerging from INDAS reflected in
NII (Rs.) 43,715 50,796 43,717 50,801
% Chng. - - lower opex and lower provisions YoY. Disbursements grew lower than loan
PPoP (Rs.) 38,420 44,760 38,422 44,766
indicating better repayments but individual loan book and LAP traction
% Chng. - -
EPS (Rs.) 44.4 52.2 46.0 53.6 weakened. Developer disbursements and loan growth continue to stay
% Chng. (3.5) (2.5)
strong. YoY both asset quality and margins stood under pressure largely due
to INDAS, seasonality in book and concerns on few large accounts on
Key Financials
developer side. However, going forward, asset quality slip-ups should be
FY17 FY18 FY19E FY20E
arrested with recoveries in pipe-line backed by ECL provision buffer and
Net Int. Inc. 36,861 37,627 43,715 50,796
Growth (%) 24.0 2.1 16.2 16.2 meaningful asset re-pricing should protect spreads enabling 17% RoEs
Op. Profit 32,370 33,007 38,420 44,760 sustenance. We build in slight conservatism into our credit costs/NPA
PAT 19,310 19,895 22,401 26,371
EPS (Rs.) 38.2 39.4 44.4 52.2
estimates for over FY19-20E leading to revised PT of Rs 637(earlier Rs 649)
Gr. (%) 16.3 3.0 12.6 17.7 based on 1.9x Mar-20 ABV.
DPS (Rs.) 6.8 7.6 9.2 9.2
Yield (%) 1.3 1.4 1.7 1.7
Weak loan growth: Loan growth at 14.7% stood lowest in past 7 quarters as
Margin (%) 2.7 2.4 2.4 2.4
RoAE (%) 19.1 16.7 16.5 17.0 retail home loans grew tepid at 11% YoY but developer loans continued the
RoAA (%) 1.4 1.2 1.2 1.2 strong growth at ~50% YoY. Individual loan disbursements growth stood muted
PE (x) 13.8 13.4 11.9 10.1
P/BV (x) 3.6 3.2 2.8 2.4
at 5% YoY largely due to de-growth in LAP. Loan mix continues to tilt towards
P/ABV (x) 3.7 3.4 3.1 2.6 LAP+developer at 19.5%. We expect loan growth at ~15-16% for FY19 with
improvement in core book led by 24 incremental branches turning operational.
Stock Performance (%) GNPA up, recoveries flowing: GNPA stood at 1.21% vs 0.72% in Q1FY18
1M 6M 12M on Stage 3 INDAS based accounting largely due to 5-6 lumpy developer NPAs.
Absolute (1.7) 3.6 (19.8)
Relative (5.1) (8.1) (34.5) While one such developer recovery of Rs 400mn on principal component came
through, another Rs 300mn should flow through interest component with
Shweta Daptardar provision release ahead. However, developer GNPAs continue to stay elevated
shwetadatpardar@plindia.com | 91-22-66322245 at 8.9% (small accounts), Q1FY19 also witnessed marginal spike in individual
Pritesh Bumb GNPAs (LRDs). Certain high value lumpy developer accounts and slower loan
priteshbumb@plindia.com | 91-22-66322232 growth trends prompt us to build-in higher conservatism into our GNPA (earlier:
0.7%, now 0.9%), credit costs (earlier: 15bps, now 20-22bps) over FY19-20E.
Asset quality
Gross NPL 20,407 10,660 91.4 13,040 56.5
Gross NPL (%) 1.21 0.7 0.5 0.78 0.4
Net NPL 13,883 5,530 151.0 7,120 95.0
Net NPL (%) 0.82 0.38 0.4 0.43 0.4
Coverage ratio (%) 32.0 48.1 (16.2) 45.4 (13.4)
75%
60%
45%
30%
15%
0%
-15%
-30%
-45%
4Q13
1Q14
2Q14
3Q14
2Q15
3Q15
4Q15
1Q16
4Q16
1Q17
2Q17
3Q17
1Q18
2Q18
3Q18
4Q18
2Q13
3Q13
4Q14
1Q15
2Q16
3Q16
4Q17
1Q19
Source: Company Data, PL Research
Seasonality plays out on retail side Developer loan disbursements stood tepid
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
Source: Company, PL Source: Company, PL
LAP & developer mix close to 20% of overall book; highest ever
3% 3% 3% 3% 2% 3% 3% 2% 3% 3% 3% 3% 3% 3% 4% 4% 4% 4% 5% 5%
4% 5% 5% 6% 6%
9% 9% 10% 10%
13% 13% 13% 13%
14% 15%
98%
97%
97%
97%
97%
93%
93%
93%
92%
91%
88%
88%
88%
86%
84%
83%
83%
83%
81%
81%
3Q14
4Q14
1Q15
2Q15
4Q15
1Q16
2Q16
3Q16
1Q17
2Q17
3Q17
4Q17
2Q18
3Q18
4Q18
2Q14
3Q15
4Q16
1Q18
1Q19
3Q13
4Q13
2Q14
4Q14
1Q15
2Q15
3Q15
1Q16
3Q16
4Q16
2Q17
4Q17
1Q18
2Q18
3Q18
1Q19
1Q14
3Q14
4Q15
2Q16
1Q17
3Q17
4Q18
Source: Company Data, PL Research
2Q14
3Q14
4Q14
1Q15
2Q15
1Q16
2Q16
3Q16
4Q16
1Q17
4Q17
1Q18
2Q18
3Q18
4Q18
4Q13
1Q14
3Q15
4Q15
2Q17
3Q17
1Q19
Source: Company Data, PL Research
1.3% 70%
1.2%
1.1% 65%
1.0% 60%
0.9%
0.8% 55%
0.7%
50%
0.6%
0.5% 45%
0.4%
0.3% 40%
0.2% 35%
0.1%
0.0% 30%
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
1Q14
2Q14
3Q14
3Q18
4Q18
1Q19
3.3
3.0
2.7
2.4
2.1
1.8
1.5
1.2
0.9
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Dec-16
Dec-17
Dec-12
Dec-13
Dec-14
Dec-15
Source: Company Data, PL Research
Reserves and Surplus 1,09,760 1,25,897 1,43,809 1,64,598 YoY growth (%) 15.1 15.2 15.0 14.4
Net current assets (59,624) (87,848) (97,765) (1,11,642) Y/e Mar FY17 FY18 FY19E FY20E
Other Assets (6,416) (7,096) (8,431) (10,000) Gross NPAs(Rs m) 6,270 13,040 17,179 17,935
Total Assets 14,99,833 17,08,092 19,87,520 23,17,658 Net NPA(Rs m) 2,050 7,120 9,280 7,941
Growth (%) 15.7 13.9 16.4 16.6 Gross NPAs to Gross Adv.(%) 0.4 0.8 0.9 0.8
Business Mix Net NPAs to net Adv.(%) 0.1 0.4 0.5 0.4
AUM 14,45,340 16,63,630 19,33,929 22,56,128 NPA coverage(%) 67.3 45.4 46.0 55.7
Growth (%) 15.5 15.1 16.2 16.7
Du-Pont
On Balance Sheet 14,45,340 16,63,630 19,33,929 22,56,128
Y/e Mar FY17 FY18 FY19E FY20E
% of AUM 100.00 100.00 100.00 100.00
NII 2.6 2.3 2.4 2.4
Off Balance Sheet - - - -
NII INCI. Securitization 2.6 2.3 2.4 2.4
% of AUM - - - -
Total income 2.8 2.5 2.5 2.5
Profitability & Capital (%) Operating Expenses 0.4 0.4 0.4 0.4
Y/e Mar FY17 FY18 FY19E FY20E PPOP 2.3 2.1 2.1 2.1
NIM 2.7 2.4 2.4 2.4 Total Provisions 0.2 0.1 0.2 0.2
ROAA 1.4 1.2 1.2 1.2 RoAA 1.4 1.2 1.2 1.2
ROAE 19.1 16.7 16.5 17.0 Avg. Assets/Avg. net worth 13.8 13.5 13.6 13.9
Source: Company Data, PL Research RoAE 19.1 16.7 16.5 17.0
Source: Company Data, PL Research
(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
800
1 09-Oct-17 Accumulate 762 662
698 2 31-Oct-17 Accumulate 701 619
596 3 10-Jan-18 Accumulate 701 578
4 26-Jan-18 Accumulate 667 557
494
5 13-Apr-18 Accumulate 667 562
391 6 24-Apr-18 Accumulate 649 550
Feb-16
Feb-18
Feb-17
Aug-15
Aug-16
Aug-18
Aug-17
7 10-Jul-18 Accumulate 649 489
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