Buy Repco Home Finance, target price Rs 650: ICICI Securities

ICICI Securities has buy call on Repco Home Finance with a target price of Rs 650. The current market price of Repco Home Finance is Rs 307.6. Time period given by analyst is one year when Repco Home Finance Ltd. price can reach defined target.

Repco Home Finance Ltd., incorporated in the year 2000, is a Small Cap company (having a market cap of Rs 1901.87 Crore) operating in NBFC sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 322.39 Crore, down -5.27 % from last quarter Total Income of Rs 340.34 Crore and down -5.71 % from last year same quarter Total Income of Rs 341.92 Crore. Company reported net profit after tax of Rs 32.12 Crore in latest quarter.


Investment Rationale
Repco Home Finance earnings were dragged by higher credit cost of 260bps (<70bps for full year FY21). This was on anticipated lines as dominance towards the self-employed customer segment was expected to reflect elevated stress amid covid disruption. However, the texture of stress was skewed more towards restructuring (5.1% under OTR 2.0) that restricted spike in stage-3 assets to 4.4% (3.7% in FY21). Provisioning towards restructured pool and delinquency buckets of Rs783mn dragged PAT to Rs321mn (down 50% YoY as well as QoQ). Growth momentum lags peers, but superior NIM sustained operating profit trajectory (up 13% YoY). The brokerage believes the company’s business franchise is currently undervalued - the stock trades below FY23E book and 6x earnings, and is available at <0.2x AUM.

Promoter/FII Holdings
Promoters held 37.1 per cent stake in the company as of June 30, 2021, while FIIs held 6.3 per cent, DIIs 22 per cent and public and others 23 per cent.