2020 High Conviction: LIC Housing Finance: A Growth Compounder Ripe for Re-Rating

LIC Housing Finance: Asset Quality Weakens But Green Shoots Emerging

LIC Housing Finance | Reiterate Buy - The Worst Is Behind Us

Mark Artherton, CFA

Inteqres

Equity Bottom-Up

<ul>
<li dir="ltr">Recent underperformance leads to a review of the bear thesis.</li>
<li dir="ltr">Low PE levels to be expected when the market has reassessed these companies as bank like with an NPL cycle.</li>
<li dir="ltr">NPLs are the key issue - as always with financial companies.</li>
<li dir="ltr">Growth is decent but NPLs could wipe out investors at any point with a growing risk of a capital call.</li>
<li dir="ltr">Declining interest rates and heavier competition continue to put margins under pressure.</li>
<li dir="ltr">The company has a structurally low RoAA due to its conservative nature but it has not been conservative enough.</li>
<li dir="ltr">Life Insurance Company of India (LIC), as the parent company, reassures debt investors, and rightly so, but equity investors would still be hit by any fall out.</li>
<li dir="ltr">Nothing for the bulls or the bears in this company unless you have a very small universe.</li>
<li dir="ltr">Long only PMs should buy peers with higher beta if they believe the sector’s problems are over or not invest here is they think there is more contagion and India’s economy will continue to disappoint (as we believe).</li>
</ul>


Recent underperformance leads to a review of the bear thesis.
Low PE levels to be expected when the market has reassessed these companies as bank like with an NPL cycle.
NPLs are the key issue - as always with financial companies.
Growth is decent but NPLs could wipe out investors at any point with a growing risk of a capital call.
Declining interest rates and heavier competition continue to put margins under pressure.
The company has a structurally low RoAA due to its conservative nature but it has not been conservative enough.
Life Insurance Company of India (LIC), as the parent company, reassures debt investors, and rightly so, but equity investors would still be hit by any fall out.
Nothing for the bulls or the bears in this company unless you have a very small universe.
Long only PMs should buy peers with higher beta if they believe the sector’s problems are over or not invest here is they think there is more contagion and India’s economy will continue to disappoint (as we believe).


LIC Housing Finance - Not Rational for Bulls or Bears