This topic contains 8 replies, has 1 voice, and was last updated by hughwf1 1 day, 11 hours ago.
October 13, 2016 at 8:19 pm #3445
LIC Housing Finance :
1)With market borrowings its predominant source of funds, LICHF’s cost of
funds has declined faster than other HFCs in the last 3-6 months.
2)Continued bond purchases by the RBI in open market operations and repo
rate cuts would continue to drive down bond yields, which would in turn
favorably impact LICHF’s cost of funds.
3)The spread on LICHF’s incremental loans has increased to 2%+ and I expect
this to sustain, given its competitive loan pricing and cost of funds.
4)I believe current valuations do not factor in sustained spread improvement. The stock is set for a re-rating.
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Over the last two years, LICHF has diversified its borrowing profile significantly.
Share of bank borrowings has declined from ~25% to ~10%, while the share of
market borrowings has increased to ~90%. In the last 18-24 months, while the repo
rate has been cut 175bp, banks have cut rates only by 75-100bp. G-Sec yields have
fallen more. As a result, HFCs with large share of bank borrowings have not
benefited as much as LICHF, which predominantly borrows from the market.
LICHF stands to benefit significantly from the growing demand for mortgages
coupled with falling interest rates. Over the past few quarters, change in loan mix
has led to 2%+ incremental spread. We expect 2% incremental spread to continue
and believe that the stock price does not factor in sustained spread improvement
due to falling G-Sec yields and narrowing AAA spreads. Post an earnings growth of
22% in FY16, we expect this momentum to sustain and model 23% PAT CAGR over
FY16-19. RoE is set to cross 20% in FY17, which would drive further re-rating. The
stock trades at 2.4x FY18E
I believe that the scrip can move up to Rs. 750.
October 13, 2016 at 8:21 pm #3446
Alay Majithia, Indore
you have compiled short and sweet analysis of LIC housing finance. I also agree with you. Since housing market is expected to grow at 20 to 22 % pa. I believe that LIC housing finance is expected to give strong returns in coming months.
October 13, 2016 at 8:25 pm #3447
Nice platform by chanakya. now I shall be able to express my views on listed shares and also get views of other experts.
LIC housing is second largest housing finance company in India and this market will have golden time in next 4/5 years,Modi government has set objective of giving house to each family, Urban population is expanding like any thing. so need for finance will go up exponentially just like auto loans. LICHF will reap best benefit of this trend. I agree with you Nargis that we should retain this scrip for atleast one year.
October 13, 2016 at 8:27 pm #3448
Arjav Jain, Jodhpur.
Nargis, thanks for bringing our attention to this platform of Chanakya. We all required such forum where we can discuss various listed shares, share our views.
I believe that along with LIC housing finance, one should also focus on Can fin Homes, which is also showing strong growth rates since last few quarters.
November 26, 2016 at 4:21 pm #3848
vishal Patel, Mumbai
Now your post has much meaning. High denomination notes wiped out, the demand for housing loans will increase and that will add to profitability of LIC Housing finance. At the current price, the scrip can be accumulated I believe.
November 26, 2016 at 4:23 pm #3849
Nilesh Shah, Baroda
I heard the lecture of Shri Deepak Parekh and he believes the demonetisation will boost performance of housing finance companies. He believes that now black money portion will not remain in housing sector deals and the buyers will have to pay full price in cheque and so they will be able to demand higher loan from finance companies
that way LIC housing finance has bright future .
November 26, 2016 at 4:28 pm #3850
Nikhil Desai, Delhi
I just studied chart of LIC Housing finance , the chart shows positive cross over by MACD line . RSI has bottomed out and now is at 48. So I believe that the scrip can give high profits in next 4 weeks. CMP Rs. 535. Reduction in interest rates will also benifit to all finance and housing finance companies.
November 28, 2016 at 12:24 pm #3857
Recently I read Q 2 results of PNBHousing finance. The scrip shows EPS expectation of Rs. 38/40 in the current year and the scrip is available at Rs. 859 eg PE ratio of 22.60 where as LIC Housing finance now at Rs. 545 and considering current year EPS of Rs. 38 to 40, the scrip is available at Attractive valuation of 13.62 to 14.50. So I believe that investors should now shift from PNB Housing finance to LIC Housing finance which shows potential to move up to Rs. 850 in coming one year.
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