Xtrade Stock Overview for 11th January 2018

GIC housing Finance Ltd (GICHFL) is one of the leading housing finance companies in India. Strong potential in loan book growth, improving LAP share in total loans and inclination towards lower cost of funds will improve its Net Interest Income (NII). Top analyst forecast net profit CAGR of 32% over FY17-FY19E to Rs 258 cr. The stock is trading attractively at 1.8x on FYFY19E P/BV.

Its loan book for FY17 end stood at Rs 9,200 cr. The Housing Loan & LAP contributes 83% & 17% respectively to the company’s loan book. Its GNPA ratio as of March FY17 stands at 2.33% while it has nil Net NPA, as it provides for 100% provisioning against GNPA.

Expect its loan book to register 25% CAGR over FY17-19E to Rs 14,500 cr led by affordable housing potential. Its capital adequacy ratio presently stands at 17%, is quite comfortable to exploit the growth opportunity. GICHFL intends to decrease its high cost bank borrowing (67% of total funds). It has been proportionately increasing the share of cheaper source of funds like, commercial paper and NHB refinancing. We expect its high cost borrowing weightage in total funds to decline by 17% to 50% over FY17- 19E. In addition, we believe its share of high yield LAP loans of the total loans will increase by 290 bps to 19% over FY17-19E. We believe that the decline in bank borrowing and increasing share of LAP will boost its Net Interest Margins(NIMs) by 21 bps to 3.7% over FY16- 19E.

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