*LIC Housing Finance: Maintain neutral*
Motilal Oswal 15 Oct 2010 *Valuation and view* We upgrade our earnings for LICHF on the back of expectations of strong disbursals. While management guided for 30-35% loan growth over FY11-12, we have modelled for 30% growth (vs earlier estimate of 27%). We are revising our EPS estimates upwards by 5% to Rs97 for FY11E and Rs118 for FY12E. LIC Housing is trading at its best-ever valuations. Re-rating is driven by organizational restructuring (completed in FY07), which led to significant improvements in loan growth and market share, higher profitability and improvement in asset quality. The stock trades at FY12 P/BV of 2.7 times and PE of 12.4 times with a RoA of ~2% and RoE of ~24%. While we remain positive on business, headwinds like constrained liquidity situation, rise in cost of funds and compression in spreads, increasing competition (ICICI Bank likely to become aggressive again) will drive underperformance, in our view. Besides, valuations are rich. *Maintain Neutral*. -- Regards Hardik Shah -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
