Moneycontrol PRO

Buy Repco Home Finance; target of Rs 275: YES Securities

YES Securities is bullish on Repco Home Finance has recommended buy rating on the stock with a target price of Rs 275 in its research report dated July 28, 2020.

July 30, 2020 / 05:32 PM IST
  • bselive
  • nselive
Todays L/H

YES Securities' research report on Repco Home Finance

Repco delivered a material beat of 6-7% on our NII/PPOP estimates in Q4 FY20, mainly driven by better spread/NIM. Annualized PPOP margin stood at 3.8%. Co. utilized strong operating performance to make additional provision of Rs400mn pertaining to likely Covid impact. Overall ECL cover rose to 1.8% of loan book (1.5% in Q3) and Stage-3 coverage increased to 36% (29% in Q3). Spread/NIM was at a multi-quarter high of 3.5%/4.7%, with reduction in funding cost. Banks comprise 75% of borrowings and cost of these funds declined 20 bps qoq. Full impact of MCLR reductions will come through in ensuing quarters. Incremental funding tie-up during April-July was at much cheaper cost. Repco has not sought moratorium from its lenders. Company has ~Rs3bn of cash/FDs, ~Rs20bn of undrawn sanctioned lines and additional funding tie-ups to meet upcoming liability repayments (~Rs12bn in coming 6m). The usual correction in GNPL % during March was precluded by the outbreak of Covid. However, co. reported substantial improvement in Stage-2 % (2.3% v/s 12% as of FY19). Repco collected June EMIs (full) from 68% of its customers, and July has been trending better. Nearly all customers under June moratorium had also taken the first moratorium. The bounce rate stood <5% for non-moratorium customers in June, comparable to pre-Covid era. Repco expects that a normal collection efficiency of 95% on the whole portfolio could be achieved by Oct/Nov if Covid flattens out.


Repco is a deep value pick with valuation at 0.5x P/ABV and 2.6x P/E on FY22 basis. Apart from high PPOP margin, robust capitalization (Tier-1 26%/DER 6.1x) lend comfort. Negative surprises on NPLs would be contained by zero CF exposure, sustained de-risking of LAP book, improving collection trends and the sharp reduction in Stage-2 %

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Broker Research
first published: Jul 30, 2020 05:32 pm