We retain Buy on GIC Housing Finance (GICHF) with a target price of R340. Q4FY15 results were on the higher side to our estimates and reinforce our belief on the positive outcome of the thrust on growth reflected in three quarters of 20%+ y-o-y growth in loan portfolio. We expect the momentum to continue and renewed focus on liability management and limited asset quality risk will aid GICHF scale up to the next leg of growth. Valuations, at 1.3x FY17e ABV, under such situations are at the lower end of the band and merit re-rating.
The inherent nature of asset quality and the targeted segment (first time buyers) coupled with thrust on recoveries have helped GICHF witness improvement over the past few quarters. While Q4FY15 GNPA was tad higher, it remains comfortable. Provision coverage ratio at 100% and R5,800 crore of floating provision (0.9% of loans) add comfort. Capital position (tier-I CAR at 15.1%) remains healthy and will aid growth over the next phase of transformation.
Q4FY15 results reflected the positive outcome of efforts towards growth visible over the past one-year. Profitability too has improved with PAT growth at 16% y-o-y for FY15. GICHF is at inflection point and drawing parallels with one member of the peer set, LIC Housing Finance, suggests valuation multiple expansion following higher growth and improved profitability.