HDFC Securities is bullish on Repco Home Finance has recommended buy rating on the stock with a target price of Rs 592 in its research report dated Jun 01, 2019.
HDFC Securities' research report on Repco Home Finance
Seasonal Improvement in Asset Quality: Broad based improvement was visible (GNPAs ~3%, -90bps QoQ), with a ~180bps decline in LAP NPAs (5%) and a ~70bps decline in Home Loan NPAs (~2.5%). The improvement played out across segments, too, with a decline in salaried (-40bps) and non-salaried (-130bps) NPAs. Caution on large ticket LAP is welcome. We have factored in GNPAs of ~2.8% over FY19-21E. LAP recoveries remain a crucial monitorable. Seasonal Uptick in Growth: Disbursals grew ~4/20% to ~Rs 8.8bn led by LAP (+28%). AUM growth was contained at ~12/4%, as repayment rates increased ~180bps QoQ to 19%, surprisingly. A sustained increase in salaried loans in the mix (45.9%, +300/100bps) augurs well for asset quality. Geographical diversification of the book continues in line with guidance. We expect AUM growth of ~ 13% over FY19-21E, as ex-TN growth picks up. Nevertheless, our growth estimates are unexciting
(given the small base).
A slight uptick in growth, and improvement in asset quality (seasonal) made for a steady 4Q at Repco. With attractive valuations (1.36x FY21E), we maintain BUY with a TP of Rs 592 (2.0x Mar 21E ABV of Rs 296).
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