JP Morgan starts LIC Housing Finance
JP Morgan has initiated coverage of LIC Housing Finance with a 'neutral' rating and a price target of Rs 225 as the company is recuperating well post Nov 2010 crisis and year-to-date stock price has outperformed the broader markets by 36 percent.
"Over the last three years, the company has delivered a loan book CAGR of 33 % and average ROE (return on equity) of 25 %, translating into EPS growth of 31 percent," JP Morgan said in a note. It sees higher funding costs, low Tier-I capital, tightening regulatory norms and teaser loan portfolio resets in 2QFY13 as near-term headwinds for the company.
However, these concerns are offset by strong franchise in the home finance business. "Over FY12/13, we expect LICHF's loan growth to be 24/27 %, which though lower than the company target is still better than industry average," the note said.
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