GIC Housing Finance Ltd.

April 22, 2015 . Equities Desk

GIC Housing Finance Ltd. (GICHF) is a leading company in India’s Housing Finance market promoted by domestic re-insurer General Insurance Corporation (GIC), with the objective of entering into the field of direct lending to individuals and other corporate to accelerate the housing activities in India. The primary business of GICHF is granting housing loans to individuals and to persons/entities engaged in construction of houses/flats for residential purposes.

Valuation and view

GICHF continues to perform well on growth, margins, and asset quality fronts. We expect the housing loan portfolio to grow by 18% in FY15E. Margins continue to hold well on lower cost of funds and higher bond market penetration. The company aims to increase the disbursements to low cost housing loans going forward, which is likely to keep the margins firm. Asset quality remains best, with GNPA below 2% and NNPA NIL. Strong visibility on business growth and margins, superior asset quality, healthy provision cover and healthy return ratios are key positives. We believe that with bottoming out of the Indian economy, higher government focus towards affordable housing and lower interest rate benefit after RBI cut lending rate by 25 bps recently, GICHF is well poised to witness higher earnings upside.

At a current market price (CMP) of Rs 242.0, the stock trades at a P/BV of 1.6 x FY16E and 1.3x FY17E. We recommend ‘BUY’ with a target price of  Rs 285, which implies a potential upside of ~18% to the CMP from a long term perspective.

Research Report GIC Housing Finance Ltd

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