Buy Home First Finance; target of Rs 1500: Motilal Oswal

Motilal Oswal is bullish on Home First Finance recommended buy rating on the stock with a target price of Rs 1500 in its research report dated April 23, 2025.

Broker Research

April 24, 2025 / 14:01 IST

Buy

26 Aug, 2025 12:21

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Motilal Oswal's research report on Home First Finance

Home First Finance (HomeFirst) in Apr’25 raised INR12.5b through a qualified institutional placement (QIP) at INR970 per share. This capital will help the company scale up its business for the next 3-4 years, accelerate growth, execute its strategic initiatives, and solidify its leadership in the affordable housing finance (AHF) segment. HomeFirst has been strengthening its presence in the AHF segment by leveraging its technology-focused underwriting approach. The company has delivered a strong AUM CAGR of ~33% over FY22-25E. Backed by its customer-centric approach and solid risk management framework, HomeFirst is well positioned to deliver an AUM CAGR of 26%+ over FY25-27E. The recent equity raise has reduced HomeFirst's leverage (assets to net worth ratio) from ~4.9x as of Dec’24 to ~3.3x (proforma) as of Apr’25 and increased its CRAR (capital to risk-weighted assets ratio) from ~33% as of Dec’24 to ~50% (proforma) as of Apr’25. The strong balance sheet will enable the company to engage with credit rating agencies for a potential rating upgrade, which could subsequently lead to an improvement in its cost of funds.

Outlook

We have incorporated the recent equity raise of ~INR12.5b in our estimates. HomeFirst trades at ~2.8x FY27E (post money), which is attractive for an AUM/PAT CAGR of ~26%/31% over FY25-27E with RoA/RoE of 3.8%/14.4% in FY27E. HomeFirst is our preferred pick in the AHF segment and we reiterate our BUY rating on the stock with a TP of INR1,500 (based on 3.2x Mar’27E P/BV).

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