Neutral Repco Home Finance; target of Rs 255: Motilal Oswal

Motilal Oswal's research report on Repco Home Finance

Repco Home Finance (REPCO)’s 4QFY23 PAT jumped 95% YoY to INR821m, driven by a sharp decline in credit costs to ~25bp (PY: ~210bp). NII grew 5% YoY to INR1.5b. PPOP was largely stable YoY at INR1.2b during the quarter. GNPA/NNPA improved ~40bp each QoQ to 5.8%/3.0% and the company increased its PCR on S3 loans by ~350bp QoQ to ~50%. ECL/EAD was flat sequentially at 4.2% in 4QFY23. We would wait for: a) the asset quality outcome of the restructured pool that has resumed repayments but still remains vulnerable; b) further scaleup in disbursements; c) moderation in credit costs and d) further decline in BT-OUT run-rate, before turning constructive on the stock again.

Outlook

We raise our FY25E EPS by 2% to factor in lower credit costs and opex. We model a loan growth of 10%/12% in FY24/FY25 and PAT CAGR of 13% over FY23-FY25E. With RoA/RoE of 2.6%/12.6% in FY25E, we maintain our Neutral rating on the stock with a TP of INR255 (premised on 0.5x FY25E BVPS).