I had written a report on Indiabulls Housing Finance Ltd (IBullHFL) about 9 months ago, when I had simply compared it's certain important financial parameters with the corresponding figures of LIC Housing Finance Ltd. (Click Here for that report). I had recommended buying IBullHFL back then at a price of around Rs.560/- based purely on 4 important points:
1) Stronger growth in Total Income & Net Profit
2) Way superior Profit margins because of better Borrowing cost management
3) Much cheaper Valuations despite stronger performance
4) Amazing Dividend payout, which continues to grow with each passing year.
I was estimating a conservative sustainable growth rate of 15% Y-o-Y in both Topline & Bottomline for the company. Since it's been 3 quarters since that report, let's do a performance check for Indiabulls Housing Finance Ltd. In the following charts I have represented the progress of Trailing-Twelve-Months numbers for IBullHFL starting from the period ending Jun'13 to 12-months ending Dec'15. Have a look:
IBulHFL has clearly done much better than my expectations of Growth. The Y-o-Y growth rates have clearly improved from the March'15 quarter. At the end of Dec'14, the Y-o-Y growth in T-T-M Total Income was a little over 17%, which has now improved to little over 30%. This is despite the fact that there has been some bit of lowering of Interest Rates during these 4 quarters. The faster growth in Total Income was not accompanied with proportionate growth in Interest Costs for IBulHFL. This led to a substantial reduction in the Interest-to-Total Income % from levels of almost 56% in Dec'14 to less than 54% in Dec'15. IBulHFL has also raised about Rs.4000 crores via a QIP issue at a price of Rs.702 per share in the month of Sept'15. This should also help reduce the company's Interest Cost as a percentage of Total Income to some extent in the coming quarters.
The expansion in Equity Capital because of issue of about 5.7 crores new shares during the QIP is what led to the dip in the company's T-T-M EPS to Rs.50/- during the Sept'15 quarter. At the end of Dec'15, the T-T-M EPS of IBulHFL stands at Rs.52.80/-. The T-T-M Net Profit of the company continues to grow at the rate of 21 to 24% Y-o-Y, despite higher Tax payments during the recent quarters. So we can expect the company to continue growing it's Net Profit at a rate comfortably above my conservative sustainable estimate of 15% for sure for many more quarters.
At the current share price of around Rs.675 to 680, IBulHFL's stock trades at a trailing P/E of still less than 13. Eventhough the P/E Ratio has improved from the levels of 10 during my previous report, I think there is still some way to go for the P/E ratio to go higher. The Dividend Yield for this year too will be over 5% at the current price. What more does an investor want?? A company that is growing consistently at a rate of over 20% in a business that is relatively risk-free, offering a Dividend Yield of over 5% currently with a potential to increase in the coming years and still available at a low P/E ratio of less than 13!! I think this company certainly deserves premium valuations compared to Industry peers. Still on the conservative side, I think IBulHFL certainly deserves a P/E ratio of atleast 18 to 20, if not more. That leaves a huge scope for re-rating in the company's stock price in the coming months & quarters.
1) Stronger growth in Total Income & Net Profit
2) Way superior Profit margins because of better Borrowing cost management
3) Much cheaper Valuations despite stronger performance
4) Amazing Dividend payout, which continues to grow with each passing year.
I was estimating a conservative sustainable growth rate of 15% Y-o-Y in both Topline & Bottomline for the company. Since it's been 3 quarters since that report, let's do a performance check for Indiabulls Housing Finance Ltd. In the following charts I have represented the progress of Trailing-Twelve-Months numbers for IBullHFL starting from the period ending Jun'13 to 12-months ending Dec'15. Have a look:
IBulHFL has clearly done much better than my expectations of Growth. The Y-o-Y growth rates have clearly improved from the March'15 quarter. At the end of Dec'14, the Y-o-Y growth in T-T-M Total Income was a little over 17%, which has now improved to little over 30%. This is despite the fact that there has been some bit of lowering of Interest Rates during these 4 quarters. The faster growth in Total Income was not accompanied with proportionate growth in Interest Costs for IBulHFL. This led to a substantial reduction in the Interest-to-Total Income % from levels of almost 56% in Dec'14 to less than 54% in Dec'15. IBulHFL has also raised about Rs.4000 crores via a QIP issue at a price of Rs.702 per share in the month of Sept'15. This should also help reduce the company's Interest Cost as a percentage of Total Income to some extent in the coming quarters.
The expansion in Equity Capital because of issue of about 5.7 crores new shares during the QIP is what led to the dip in the company's T-T-M EPS to Rs.50/- during the Sept'15 quarter. At the end of Dec'15, the T-T-M EPS of IBulHFL stands at Rs.52.80/-. The T-T-M Net Profit of the company continues to grow at the rate of 21 to 24% Y-o-Y, despite higher Tax payments during the recent quarters. So we can expect the company to continue growing it's Net Profit at a rate comfortably above my conservative sustainable estimate of 15% for sure for many more quarters.
At the current share price of around Rs.675 to 680, IBulHFL's stock trades at a trailing P/E of still less than 13. Eventhough the P/E Ratio has improved from the levels of 10 during my previous report, I think there is still some way to go for the P/E ratio to go higher. The Dividend Yield for this year too will be over 5% at the current price. What more does an investor want?? A company that is growing consistently at a rate of over 20% in a business that is relatively risk-free, offering a Dividend Yield of over 5% currently with a potential to increase in the coming years and still available at a low P/E ratio of less than 13!! I think this company certainly deserves premium valuations compared to Industry peers. Still on the conservative side, I think IBulHFL certainly deserves a P/E ratio of atleast 18 to 20, if not more. That leaves a huge scope for re-rating in the company's stock price in the coming months & quarters.
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