Neutral Repco Home Finance; target of Rs 500: Motilal Oswal

Motilal Oswal's research report on Repco Home Finance

Repco Home Finance (REPCO)’s 2QFY25 PAT grew 15% YoY to INR1.1b (in line). The company’s 1HFY25 PAT grew ~16% YoY to ~INR2.2b, and we expect 2HFY25 PAT to increase ~7% YoY. The NII declined ~2% YoY to ~INR1.7b (in line). REPCO reported a healthy growth in its other income, primarily led by improvements in insurance commissions, investment income, and recoveries from written-off accounts. Opex rose ~21% YoY to INR517m (~10% above MOFSLe) due to higher depreciation, which would normalize from next quarter onwards.  Provision write-backs for 2Q stood at ~INR160m, translating into annualized credit costs of -45bp (PY: ~5bp and PQ: ~4bp). GNPA declined ~30bp QoQ to ~4%, while NNPA dipped ~5bp QoQ to ~1.7%. The company reduced the PCR on S3 loans by ~1pp QoQ to ~61%.

Outlook

We cut our FY26/FY27 estimates by ~5% each to factor in lower loan growth and normalization in credit costs. We model a loan/PAT CAGR of ~10%/8% over FY24-FY27E. For an RoA/RoE of 2.8%/12.4% in FY27E, we reiterate our Neutral rating on the stock with our revised TP of INR500 (based on 0.8x Sep’26E BVPS).

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