Repco Home Finance’s growth strategy and business initiatives should be watched closely as they would pave the way for earnings momentum, with the company’s new CEO likely to join on April 22, brokerage ICICI Securities said.
“The company’s trading franchise is currently undervalued – shares are trading below FY23E pound and 5x earnings,” the note added. The national brokerage and research firm maintained its buy rating on financial stocks with a revised target price of ₹563, implying a potential benefit of giving a multibagger efficiency of around 140%.
However, fundamentally weak performance derailing the growth and behavior of the restructured portfolio could be key risks, according to ICICI Securities. In addition, the performance of the restructured portfolio and its evolution would be a key element to monitor in the future, he said.
Repco Home Finance (Repco) disappointed on most operating metrics in Q3FY22. Not only an over-provisioning of Rs 700 million on additional GNPA (as per revised asset classification standards) resulted in a high cost of credit of >250 bps, but also lagging growth, NIM compression and high operating profits, the brokerage pointed out.
After the revised asset classification standards, ARPGs climbed to 7% from a reported Stage 3 of 4.6% (4.3% in Q2FY22). Growth momentum lagged significantly behind its peers, only HFC where disbursements decreased by 19.5% YoY (YoY) / 8% QoQ and loan book decreased by 2.3% quarter-on-quarter (QoQ). However, the change in management was essential and could act as a positive trigger, believes ICICI Securities.
The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.
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