Hold Home First Finance Company; target of Rs 1003: Khambatta Securities

Khambatta Securities' research report on Home First Finance Company

Home First Finance Company (HFFC) reported solid results as the company made the highest-ever quarterly disbursals in 1Q FY23. AUM registered a robust 35.8% y-o-y growth to reach Rs 5,832 crore as of 31 June 2022. Loan disbursals increased by 117.0% y-o-y to Rs 661 crore during the quarter. NII expanded 44.0% y-o-y to Rs 94.0 crore as net revenues increased 22.2% y-o-y to Rs 108.6 crore. PAT increased 46.0% y-o-y to Rs 51.2 crore. Gross Stage 3 ratio stood at 2.1% as of June-end compared to 2.3% in March 2022. GNPA ratio based on the old classification was 1.2% (vs 1.3% in Mar-22). GNPA provision coverage ratio stood at 45.8% in Jun22 vs 47.1% in Mar-22. PCR without the impact of the new RBI circular was 81.0% in Jun-22 vs 83.6% in Mar-22 and 69.1% in Dec-21. Total CRAR was 52.3% while Tier-1 capital was 51.8% as of June-end. Physical branches and total distribution points increased from 80 to 93 and from 200 to 224, respectively on a q-o-q basis.

Outlook

The HFFC stock has appreciated by 26% since we initiated coverage on the company on 01 February 2022. Marginally revising upward FY24E earnings, we value HFFC at Rs 1,003 (up from Rs 988), implying a FY24E P/E of 35x and P/BV of 4.3x and informing an upside of 6%. Consequently, we change our rating for the stock from BUY to HOLD as we believe, at current levels, the stock is near its fair value.