'Accumulate' LIC Housing Finance; expect 19% upside: Kotak
The brokerage has maintained its earnings estimate for the stock after the company clarified that all the loans have been approved in compliance with relevant regulatory norms.
By ET Bureau |
MUMBAI: Kotak Securities has recommended investors to ‘Accumulate’ shares of LIC Housing Finance after the CBI arrested its CEO in an alleged land scam.
The brokerage has maintained its earnings estimate for the stock after the company clarified that all the loans have been approved in compliance with relevant regulatory norms.
“Following certain media reports suggesting CBI investigation referring to LIC HF's exposure to certain developers loan, the company has clarified on the issue to the exchanges indicating that all the loans have been approved in compliance with relevant regulatory norms.
Additionally, all the loans in question are performing assets and are secured by underlying assets to the full satisfaction of the approving authority.
We continue to maintain our earnings estimates for LICHF; we expect net profit growth of 44% yoy in FY11 to Rs 9.6 bn and 13% yoy in FY12 to Rs 10.8 bn. However, LICHF NIM may witnesses cost pressures due to rising interest rates since close to 70% of the assets are on floating as against 65% of the liabilities.
We expect a NIM of 2.8% for FY11 and 2.7% for FY12. Post the recent correction, the current market price indicates a 19% upside to our price target of Rs 1300 (currently trading at 2.1x FY12 P/ABVx). We recommend investors to ACCUMULATE (reduce earlier),” the report said.
The brokerage has maintained its earnings estimate for the stock after the company clarified that all the loans have been approved in compliance with relevant regulatory norms.
“Following certain media reports suggesting CBI investigation referring to LIC HF's exposure to certain developers loan, the company has clarified on the issue to the exchanges indicating that all the loans have been approved in compliance with relevant regulatory norms.
Additionally, all the loans in question are performing assets and are secured by underlying assets to the full satisfaction of the approving authority.
We continue to maintain our earnings estimates for LICHF; we expect net profit growth of 44% yoy in FY11 to Rs 9.6 bn and 13% yoy in FY12 to Rs 10.8 bn. However, LICHF NIM may witnesses cost pressures due to rising interest rates since close to 70% of the assets are on floating as against 65% of the liabilities.
We expect a NIM of 2.8% for FY11 and 2.7% for FY12. Post the recent correction, the current market price indicates a 19% upside to our price target of Rs 1300 (currently trading at 2.1x FY12 P/ABVx). We recommend investors to ACCUMULATE (reduce earlier),” the report said.
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