Hold Home First Finance Company; target of Rs 1,075: ICICI Securities

ICICI Securities recommended hold rating on Home First Finance Company with a target price of Rs 1,075 in its research report dated July 28, 2024.

Broker Research

August 06, 2024 / 12:10 IST

Hold

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Securitie's research report on Home First Finance Company

Disbursement during Q1FY25 remained strong at 5.5% QoQ even during a seasonally weak quarter. The same supported robust AUM growth of 35% YoY / 8% QoQ; BT-out rate moderating to 6.3% vs >8% in Q4FY24 further boosted growth. NII growth remained in line with AUM growth at 7% QoQ largely supported by healthy spread at 5.2%. Cost of funds remained flat QoQ at 8.3% while asset yields moderated to 13.5% and the same resulted in steady spread. Steady spread led to stable NIM at 5.3% supported by higher DA income during Q1FY25. In line with historical trends, staff cost grew 14% QoQ and other expenses were up 10% QoQ which led to cost-income ratio increasing to 35% vs 34% QoQ. However, the same is within long-term average of 34-36%. Asset quality remained robust with GNPL remaining flat QoQ at 1.7% and marginal increase in 1+ DPD to 4.5% vs 4.2% QoQ. While total provisioning increased QoQ to INR 56mn vs INR 27mn QoQ, credit cost continued to be lower at 22bps in Q1FY25. Overall, earnings grew 5% QoQ with RoA/RoE settling at 3.6%/16.3%, respectively.

Outlook

Home First Finance’s (HomeFirst) Q1FY25 performance with steady AUM / disbursement growth of 35% YoY / 8.0% QoQ, even in a seasonally weak quarter for the industry, is a testimony of its resilient business model and superior execution. Notably, RoE improved 20bps QoQ to 16.3% - highest in past 15 quarters. Spreads remained stable at 5.1% during Q1FY25 and continue to be within the guided range of 5-5.25%. While the price hike in last two years kept annualised BT-out ratio elevated till FY24, Q1FY25 saw sharp improvement with BT-out ratio falling to 6.3% vs 8.3% in Q4FY24 and the same supported strong AUM growth. Marginal cost of borrowing at 8.6% vs blended CoF at 8.3% and origination & blended yield at similar level of 13.4% pose risk of further spread compression going ahead. Downgrade to HOLD (from Buy) with a revised TP of INR 1,075, valuing the stock at 3.5x Sep’25E BVPS (3.2x earlier).

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