HomeFirst’s 4QFY23 PAT grew 6% YoY/9% QoQ to INR640m. Adjusted PAT (after excluding the benefit of tax rate change in 4QFY22) grew 33% YOY. FY23 PAT rose 21% YoY to ~INR2.9b (PY: ~INR1.9b in FY22). Annualized credit costs stood at 48bp (PQ: 44bp). NII grew 31% YoY to INR1.12b. Non-interest income grew 55% YoY, driven primarily by higher assignment income and advertisement income. 4QFY23 opex grew 30% YoY, led by investments in new branches and resultant higher employee expenses. PPoP grew 38% YoY to INR910m. HomeFirst has been opening new branches and expanding its distribution network in Tier 2/3 cities. It has also been investing in technology and analytics to improve its underwriting and credit assessment capabilities, which will help it target right customers in these markets. A strong and steady execution positions the company well to capture the significant opportunity in the affordable housing segment.
OutlookWe model an AUM/PAT CAGR of ~31%/~27% over FY23-FY25E. HomeFirst’s asset quality should strengthen and credit costs are likely to remain benign over FY24-FY25E. We increase our FY24/25 EPS estimates by 4%/3% to factor in higher loan growth and other income. Reiterate BUY with a TP of INR900 (premised on 3.3x FY25E BVPS).
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