Buy Repco Home Finance; target of Rs 345: YES Securities

YES Securities' research report on Repco Home Finance

Stronger-than-expected disbursements (up 16% qoq and 11% above est.) and loan growth (2% qoq v/s expected flat) despite no portfolio buyout (Rs700mn in Q1). Annualized portfolio run-off rate has stabilized at 18% with moderation in BT Out run rate (Rs0.8bn/month now). NIM improved by 20 bps qoq, instead of expected decline, with 30 bps expansion in portfolio yield (45 bps rate hike taken in July-August) and only 10 bps increase in CoF (bank loans linked to 6m/1yr MCLRs). Much lower than estimated credit cost was underpinned by stable GNPLs - significant slippages from the restructured pool (billing commenced between MayJuly) were mitigated by robust NPL recoveries (focused recovery efforts).

Outlook

Our FY23/24 earnings estimates undergo 4-11% upgrade on bettering of growth, NIM and credit cost assumptions. We now expect Repco to deliver loan portfolio and earnings CAGR of 9-12% over FY22-24 with avg. RoA/RoE delivery of 2.4%/12% respectively. Valuation at 0.6x FY24 P/ABV can re-rate significantly on growth progression. Reiterate BUY with increased 12m price target of Rs345.

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