Mortgage loan book of the housing finance company has demonstrated a 25% y-o-y growth during the Q1FY09 to Rs.227.57 billion.
LICHF continues to witness strong growth in its business subsequent to buoyant demand for housing. Robust 55% y-o-y growth in sanctions indicates strong disbursements to follow.
Meanwhile, the due higher provisioning requirement and asset quality constrains, mortgage assets loss attractiveness for large private banks. This in contrary proved advantageous for housing finance companies like LICHF. We expect a 22.5% y-o-y growth in the loan book for FY09E.
With revision in lending rate in the beginning of Q2FY09, the margins are likely to remain strong in the next quarter (Q2FY09). NIM is expected to be around 2.7% for FY09E and a NII of Rs.6.6 billion.
We continue to maintain our 22.5% y-o-y growth estimates for its mortgage loan portfolio over FY09, to Rs268.7 billion from Rs.219.4 billion in FY08.
The stock has witnessed quick run up in price post its Q1FY09 results. We maintain our earning estimates and fair price derivatives for the stock until Q2FY09 and value LICHFL at Rs377, based on some of the parts methodology.
The core business has been valued at Rs342, and the stake in LICMF (39%) at Rs36 per share. We recommend ACCUMULATE (from buy previously) for LICHF with a 12-month price target of Rs377.