Buy LIC Housing Finance; target of Rs 620: Sharekhan

Sharekhan’s research report on LIC Housing Finance

LIC housing Finance (LICHF) posted decent operating performance for Q4FY2018. While net interest income (NII) was down marginally by 1.4% y-o-y to Rs. 1,057.9 crore, NIMs bottomed out and asset growth outlook brightened relatively. Net interest margins (NIM) for the quarter increased by 16 BPS sequentially to 2.49%, even though on a y-o-y basis, it declined by 48 BPS due to increasing competition in the housing finance space and hardening bond yields, which in turn impacted cost of funds (CoF).

Outlook

The recent PLR rate hike should be positive as it will lift overall portfolio yield, support spreads.We upgrade our rating to Buy with a price target of Rs. 620.

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