LIC Housing Finance Q2 Results Review - Asset Quality Improves But Loan Growth Still Muted: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.LIC Housing Finance Ltd. reported a Q2 FY24 profit after tax of ~Rs 11.9 billion (in line), which grew 290% YoY, driven by healthy net interest income growth (even as Q2 FY23 had the lagged impact of transmission of interest rates) and in-line credit costs. NII at ~Rs 21.1 billion (in line) rose ~81% YoY in Q2 FY24, while pre-provision operating profit at Rs 19 billion (5% beat) grew 100% YoY (but declined 5% QoQ). Cost-to-income ratio stood at ~12% (previous year: ~22% and previous quarter: ~11%). Net interest margin (reported), at ~3%, contracted ~15 basis points QoQ in Q2 FY24. As of H1 FY24, reported yields and cost of fund stood at 10% and 7.7%, respectively, leading to spreads of 2.4% (versus Q1 FY24 spreads of 2.5%). We do not believe that NIMs can be sustained at current levels and model a NIM compression (from current levels) for the rest of the fiscal year. We model NIM of 2.9%/2.7%/2.6% for FY24/FY25/FY26. To factor in the higher NIM (versus earlier expectations) and lower credit costs, we increase our FY24E earnings per share by ~5%. We model an advances/profit after tax compound annual growth rate of 9%/21% over FY23-26E for an return on asset/return on equity of 1.5%/14% in FY26E. LIC Housing Finance's moderation in yields driven by re-pricing for customer retention and muted loan growth was a dampener despite the asset quality improvement (aided by technical write-offs). While we hope for the volatility in NIM and expected credit loss provisioning to subside, we still see a favorable risk-reward at 0.7 times September 2025 price/book value. We reiterate our 'Buy' rating with an unchanged target price of Rs 550 (premised on 0.8 times Sep-25E P/BV)..Click on the attachment to read the full report:.Aavas Financiers Q2 Results Review - Earnings Inline; Lower Margin Was A Dampener: Systematix.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

LIC Housing Finance Q2 Results Review - Asset Quality Improves But Loan Growth Still Muted: Motilal Oswal

Earnings in line even as net interest margin moderates QoQ

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