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Prabhudas Lilladher Report
Led by higher provisions, we cut FY23/24/25E profit after tax by ~13%/3%/3%. LIC Housing Finance Ltd. saw a weak quarter yet again; while pre-provision operating profit was a 4.6% beat driven by higher net interest margin, earnings were a miss led by spike in provisions due to QoQ increase in provision coverage ratio to ~51% from ~44%.
While provisions for Q3 did not include any writeoffs, LIC Housing Finance wants to maintain PCR at ~50% which could normalise credit costs in Q4 to 45-50 basis points from 119 bps in Q3.
We could not determine a concrete reason for an elevated PCR, since in case of a housing finance company collateral value and quality is strong.
Slower pace of resolutions in builder portfolio and recurring one-time aberrations in quarterly earnings would continue to weigh on the stock.
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