Lord Jesus Christ Says...

“And so I tell you, keep on asking, and you will receive what you ask for. Keep on seeking, and you will find. Keep on knocking, and the door will be opened to you. For everyone who asks, receives. Everyone who seeks, finds. And to everyone who knocks, the door will be opened.” Jesus Christ, Luke 11:9-10

14 Apr 2016



In line with our expectations the RBI has reduced the repo rate by 25bp to 6.5% in its first bi-monthly policy review of this fiscal and addressed the liquidity shortage witnessed by the bank. We believe that RBI has further room for rate cuts in the quarters to come. Lower interest rates will come as a relief for both consumers and corporates. Interest rate sensitive sectors like auto, banks, housing finance companies and select players in the infrastructures and real-estate space could see improvement in volumes. Our top-picks in these sectors are LIC Housing Finance, Dewan Housing Finance, Mahindra Lifespace, and IL&FS Transportation Networks. Further we remain positive on consumption based stocks like Blue Star, Radico Khaitan, Siyaram Silk Mills, etc.

LIC Housing Finance n Significant under penetration of mortgages in India: India is expected to witness a robust housing finance growth going forward as the mortgage penetration in India remains at very low levels at 9% to GDP as compared to the developed countries where it is in the range of 60-100%. n NIM expansion visible: LIC Housing Finance is able to raise funds from lowcost NCDs due to its strong AAA credit rating and backing by strong promoters like LIC. In a declining interest rate environment, NBFC's like LIC Housing are well-placed to witness margin improvement in our view. n Outlook: For companies like LICHF, the funding environment has eased; thus it will lead to lower cost of borrowing, while outlook for growth in retail housing loans remains positive, going forward. We expect the company to post a healthy loan book CAGR of 18.7% over FY2015-17E, which is likely to reflect in an earnings CAGR of 21.0%, over the same period. The stock currently trades at 2.3x FY2017E ABV. We maintain our Buy rating on the stock, with a target price of `592. Key Financials Y/E Op. Inc NIM PAT EPS ABV ROA

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