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LIC Housing Finance

Q4 Results Update: LIC Housing Finance.

LIC Housing Finance has reported good results for the Q4 FY09 quarter.
Mortgaged loans and disbursements for FY09 grew by 26% yoy and 22% yoy respectively, disbursement for Q4FY09 grew by 21% yoy. NII for Q4FY09 stands higher by 34% yoy, the better than expected growth is attributable to improved margins and enhanced mortgage loan growth. Net profit grew by 33% yoy during Q4FY09 in light of higher processing fee contribution and lower than expected NPL provisions.

Higher growth in net profit during FY09 is mainly on the back of improved margins coupled with healthy mortgage loan growth. Improved recoveries and non-fund based income (from short term fund management activity) also supported the net profit growth.

The stock has historically traded at around 1x its adjusted book value, following concern over its asset quality. Management's cautious effort to check slippages has resulted into healthy asset quality. The superior return ratios RoA of 2% and RoE of 24% coupled with healthy asset quality is expected to fetch better valuation for the stock going forward.

In the backdrop of healthy disbursement growth and firm NIM, there is buoyant growth in net profit. Going forward, expect a net profit growth of 15% yoy during FY10 to Rs 6.1bn as compared to Rs 5.3bn in FY09, with an EPS of Rs. 72 and Book Value of Rs.297.
Investors can buy LIC housing finance on declines with a price targe of 375.