INSUBCONTINENT EXCLUSIVE:
CLSA has a buy call on Indiabulls Housing Finance with a target price of Rs 1,700.
The current market price of Indiabulls Housing Finance is
Rs 1,372.
Time period given by the brokerage is one year when Indiabulls Housing Finance price can reach the defined target.
CLSA's view
on the company:For 1QFY19, Indiabulls Housing Finance (IHFL) reported IndAS profit of Rs11bn, up 30 per cent YoY
The key positive was the healthy growth in AUMs (up 33 per cent YoY) and QoQ expansion in spreads despite increase in funding costs
While rise in share of housing loans and cautious growth in LAP help to derisk book, higher growth in corp loans with rising share of
developer loans (vs LRD) will offset some of that
Transition to IndAS can lift net worth by ~18 per cent, as it includes MTM gains on stake in OakNorth and DTL reversal; even earnings should
HDFC Ltd) and mgmt has retained ad-hoc provisions of Rs10.5bn (0.8 per cent of AUM)
We raise earnings estimates by 3-4 per cent to factor in the changes per IndAS and see 23 per cent Cagr in profit over FY18-21CL and retain
result was 33 per cent growth in AUMs, led by a 41 per cent rise in housing loans whose share has risen from 57 per cent one year back to 60
While the rise in share of home loans and cautious growth in LAP (18 per cent YoY) are derisking the book, some of this is getting offset by
quality of developers is strong
Encouragingly, the spreads expanded 12bp QoQ to 3.2 per cent (flat YoY) aided by rate hikes and access to lower cost of funds like ECBs/CPs
earnings: (1) IndAS based net worth is ~18 per cent higher than Indian GAAP aided by MTM gain on investment in OakNorth and reversal of
Deferred Tax Liability (DTL), (2) earnings should be a tad higher, as lower tax rate and credit costs will offset lower NII and higher costs
(as cost of zero coupon bonds and Esops is amortised)
will be based on actual loss experience; it is also carrying Rs10.5bn of ad-hoc provisions (0.8 per cent of loans).
Retain BUYWe raise
earnings estimates by 3-4 per cent to factor in the changes per IndAS and see 23 per cent Cagr in profit over FY18-21CL (but not fully like
We retain BUY with a 12-month TP of Rs1,700 (earlier Rs1,650) based on 3.2x Jun-20CL adjusted PB.
