Buy Repco Home Finance; target of Rs 450: YES Securities

YES Securities' research report on Repco Home Finance

Our earnings estimate of FY24/25 undergo 4-5% upgrade on raising of loan growth and moderation of credit cost assumptions. We expect 13% loan CAGR (being conservative v/s Management’s expectations), 17% PAT CAGR and avg. 2.7%/13% RoA/RoE delivery over FY23-25. Under the leadership of the new MD & CEO (Mr. Swaminathan), the company has delivered consistent gradual improvement in growth and meaningful improvement in asset quality. After all structural changes are done (likely by Q2/Q3 FY24), the loan growth should improve at a faster clip. Notwithstanding the recent strong price performance, Repco’ valuation still remains undemanding at 5x P/E and 0.8x P/ABV on FY25 estimates.

Outlook

The expected further improvement in growth and asset quality will incrementally re-rate the stock. We retain BUY with substantially raised 12m PT of Rs450.