Q1 Results: Analysts Cut Target Price For Indiabulls Housing Finance
Most analysts cut target prices for Indiabulls Housing Finance Ltd. as the non-bank lender's asset quality worsened and provisions rose in the quarter ended June.
The company's gross non-performing asset ratio rose to 1.47 percent from 0.88 percent in the three months ended March, while its net NPA ratio increased to 1.1 percent from 0.69 percent, according to its exchange filing.
The brokerages also remain cautious on the home financier's proposed merger with Lakshmi Vilas Bank despite reasonable valuations.
Indiabulls Housing Finance said it has received an approval from India's competition regulator for the deal and is awaiting nod from the Reserve Bank of India and the stock exchanges.
Here's what analysts have to say about Indiabulls Housing Finance's Q1 Results 2019-20:
Morgan Stanley
- Underweight rating with a target price of Rs 600 apiece.
- Miss was driven by weaker revenues.
- Provisioning on accounts like Cafe Coffee Day and Zee Enterprises.
- Indiabulls Housing Finance expects to consummate the merger with Lakshmi Vilas Bank by March 2020, provided they get all approvals.
Macquarie
- Stock is cheap at 1 time its FY21 estimated price-to-book value.
- Growth continues to decline; targeting diversification into MSME.
- Rs 600-crore addition to gross stage 3—credit impaired financial assets—despite significant recoveries in fully provided Palais-Royale project.
- Advises investors to monitor developments with regards to merger with Lakshmi Vilas Bank before committing capital.
CLSA
- Maintains ‘Buy' and cuts target price to Rs 670 from Rs 920 apiece.
- Lowers estimates by 30 percent due to weak top line.
- Tight funding and a push to unwind corporate loans drags top line.
- Corporate NPAs rise but recoveries partially offset this.
- Valuations reasonable at 1.7 times its June 21 adjusted book value.
Credit Suisse
- Maintains ‘Neutral' and cuts target price to Rs 560 from Rs 800.
- Lowers earnings estimates by 19-24 percent, target price by 30 percent to Rs 560.
- Growth remains muted; some asset quality stress visible.
- Margins remained stable sequentially as the company raised rates in anticipation of an increase in cost of funds.
- Meaningful step-up in terms of growth is unlikely.
- Expects loan book decline of 7 percent in FY20 and build higher credit costs.
- Regulatory approval for the merger is a key catalyst for the stock.
Watch the interview of Indiabulls Housing Finance Deputy MD Ashwini Hooda here:
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