Greater demand in real estate – LIC Housing Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.8% higher at 14,133. Among the sectoral indices, IT (+2.7%), Metal (+5.1%), and Auto (+1.6%) closed higher. Pvt Bank (-0.1%) and Bank (-0.04%) were the only sectoral indices that closed lower. Tata Steel (+8.4%), Hindalco (+6.9%), and Eicher Motors (+4.3%) closed on a positive note. Hero Motors (-1.6%), Kotak Bank (-1.2%), and Bajaj Finance (-1.2%) were among the top losers.

Excerpts from an interview of Mr. Siddhartha Mohanty, MD & CEO, LIC Housing Finance with CNBC-TV18 dated 1st January 2020:
● The real estate sector faced issues because of lower liquidity and demand.
● Mr. Mohanty said these issues are addressed and now the demand is normal.
● The consumption demand has gone up and there is a pickup in new real estate registration.
● Not only the metros but even tier-2, tier-3 cities are showing high growth.
● He said the company will close in a high double-digit year on year growth by the end of FY21.
● Speaking about bad loans, he said the moratorium ended in August and now people who had opted for the moratorium have also started paying.
● He said there is an improvement in big accounts.
● Speaking on spreads and margins, he said the company is raising debt at a very competitive rate.

Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of LIC Housing Finance was ₹ 382 as of 04-January-2020. It traded at 8x/ 7x/ 5x the consensus Earnings per share estimate of ₹ 49.8/57.8/71.1 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for LIC Housing Finance is ₹ 363/- which implies a PE multiple of 5x on FY23E EPS of 71.1/-.
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