Repco Home Finance Ltd. share price forecast

Repco Home Finance: REPCO's Q1FY23 earnings surprised positively after a slew of disappointing performances over the past few quarters. GS-III/NS-III improved QoQ to 6.4%/4.2% (Q4FY22: 7%/4.9%), as aligned to the RBI's revised asset classification norms. Loan book grew sequentially by 1% as disbursals witnessed healthy traction (+7% QoQ) and the management is upbeat about delivering 10-11% loan growth in FY23. NIM declined QoQ to 4.6% on the back of increasing competitive intensity (retaining prime customers) leading to pressure on asset yields. The leadership team has launched several initiatives to drive portfolio growth, while simultaneously controlling asset quality. We continue to monitor these developments before turning more constructive in our estimates. We revise our FY23/FY24 earnings estimates lower by 2%/1% due to pressure on NIMs and maintain ADD with a revised TP of INR274 (0.7x Mar-24 ABVPS). ITD Cementation: ITD Cementation (ITD) reported Q1FY23 revenue/EBITDA/APAT at INR 11/0.9/0.3bn, missing our estimates on all fronts by 8/16/24.4%. FY23 revenue guidance remained unchanged at 25% YoY growth for FY23, with margin in high single digit, and as commodity inflation is expected to cool off in the coming quarters, margin is expected to move into lower double digits in FY24. With an OI of INR 60.8bn in Q1FY23, the OB, as of Jun'22, stood at INR 206.4bn (~5.4x FY22 revenue), which is a lifetime high for the company. The OB is well-diversified, providing a natural hedge from a slowdown in any particular business segment. The net D/E as of Jun'22 stood at 0.29x vs. 0.11x as of Mar'22, providing room...

Repco Home Finance (Repco) reported PAT of Rs621mn in Q1FY23, ahead of our expectations, due to lower credit cost at Rs237mn (80bps) vs our estimate of >Rs500mn.

Given the impending appointment of a new MD & CEO from 1 March, we await a roadmap from the new management. We hack our FY22/FY23/FY24 earnings estimates by 24%/15%/14% due to elevated credit costs and muted loan growth and maintain ADD with a revised target price of INR328 (0.9x Sep-23 ABVPS). Repco Home Finance: REPCO's Q3 earnings disappointed our estimates due to elevated provisioning and subdued loan growth (-2.3% YoY). GS-III/NS-III increased sharply to 7%/5.1% (Q2FY22: 4.3%/2.5%), as REPCO aligned its stage-wise asset classification with the RBI's IRAC norms. However, the spike in the impaired portfolio, adjusted for change in classification norms, was a negative surprise, even as the macro environment saw healthy recovery. Further, loan growth continued to be muted, led by softer disbursements (-20% YoY; -15% QoQ), falling significantly short of management guidance, and it is only likely to pick up in FY23. NIMs were steady sequentially at 5%, driven by stable asset yields.

Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 155 branches and 24 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at ~117bn at the end 3QFY22. RHFL average loan per unit is...

Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 153 branches and 24 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at ~118bn at the end 2QFY22. RHFL average loan per unit is...

Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 153 branches and 24 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at ~119bn at the end 1QFY22. RHFL average loan per unit is...

Repco Home Finance Gross stage 3 assets improved to 3.7% vs 4.3% YoY (4.3% Proforma NPA in Q3FY21); Net NPA declined to 2.3% led by higher PCR at 40% YoY. Restructured assets remains stable at 0.3% for FY21 while need to watch out for Restructuring 2.0. Loan growth was lower at 2% YoY (4% YoY Q3FY21) vs 7% YoY (FY20) led by higher balance transfers by banks as well as lower disbursements (up 6% YoY). NII grew by 6% YoY (down 3% QoQ) led by improvement in NIMs; PPoP grew by 9% YoY led by higher other income (up 41% QoQ). PAT grew strongly by 33% YoY led by lower provisions (down 28% YoY). Despite the lower growth it is able to garner a spread of 3.5% with a comfortable liquidity position. We...

Repco Home Finance (REPCO)'s PAT grew 14% YoY to INR796m in 3QFY21, 8% above our estimates. The PAT beat was driven by an NII beat, marginally offset by slightly higher provisions. The quarter gone by was characterized by a recovery in disbursements, improvement in margin, and maintenance of asset quality....

Mahanagar Gas: Our ADD recommendation on Mahanagar Gas (MGL) with a price target of INR 916 is premised on its loyal customer base of CNG and commercial establishments (together comprising ~80% of the sales mix in FY20), which are less price-sensitive than industrial customers that enable the company to maintain its per-unit margins higher than peers. We do not foresee any significant regulatory adversity in its CGD business either through a change in gas allocation or capping returns. 2QFY21 EBITDA/APAT was 41/43% above estimates, owing to 9% higher-than-anticipated volumes, and 30% higher per-unit EBITDA margin. Repco Home Finance: REPCO's 2Q earnings were ahead of estimates, led by lower-than-expected provisions. The company, like most lenders, saw a sharp improvement in collection efficiency and a sequential rebound in disbursals. We have revised our estimates upwards, as we factor in lower (vs. our earlier estimates) provisions and slightly faster loan growth. The company continues to remain comfortable in terms of funding and liquidity (CRAR- 26.8% and available undrawn lines at ~17% of AUM), and these drive our ADD rating (target price of Rs 282). ONGC: Our REDUCE recommendation on ONGC with a price target of INR 70 is premised on (1) muted crude oil and gas realisations and (2) lack of production growth for oil. Despite production cuts from OPEC and non-OPEC countries, we expect oil prices to remain at USD 36/41 per barrel in FY21/22E vs. USD 59/bbl in FY20, given the weak global macro. Lower oil and gas realisations will drag profitability down for ONGC. In 2QFY21,...

Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 149 branches and 27 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at ~119.7bn at the end 1QFY21. RHFL average loan per unit...

However, REPCO's strong capital base (CRAR at 26.1%) and comfortable funding position are (remain) positives and drive our ADD rating (target price of Rs 207, 0.7xFY22E ABV) along with relatively inexpensive valuations. REPCOs 1Q earnings were adversely impacted by a sharp fall in margins and elevated provisions. The sequential reduction in Gross Stage III was optical. Further, while the portfolio under moratorium remained sticky at ~35%, borrowers representing 8.7% of loans had not paid a single instalment since March, which was more confounding than promising, given that collection efficiency for the month was between 65-70%.

Co. utilized strong operating performance to make additional provision of Rs400mn pertaining to likely Covid impact. Overall ECL cover rose to 1.8% of loan book (1.5%...

Sluggishness in its home state and a conscious effort to focus on less risky (low ticket LAP) and salaried home loans, and no major branch addition plans will curtail growth, in spite of REPCO's small base and healthy CRAR. Inexpensive valuations underpin our stance. Even the ascription of a measly 1.3x multiple, yields a considerable upside. REPCOs 3Q was in line with estimates as growth slowed (9%) and NIMs expanded (+30bps QoQ). Asset quality was stable QoQ. Maintain BUY with a TP of Rs 422 (1.3x Dec-21E ABV).

Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 149 branches and 27 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at ~116.2bn at the end 3QFY20. RHFL average loan per unit...

10 February 2020 PAT increased 25% YoY to INR697m (2% beat) in 3QFY20. While NII was largely in line with our estimate, higher opex (7% miss) was offset by lower provisioning (11% beat), leading to largely in-line PAT. Reported spreads improved 20bp QoQ/YoY to 3.3%, while the GNPL ratio was sequentially stable at 4.2%. Buy with a target price of INR390. Disbursements were down 11% YoY at INR6.6b due to a similar decline in both home loan and LAP disbursements. ~56% of the book (+6% YoY). Loan growth in Maharashtra (third largest state) also slowed down from 23% YoY in 2QFY20 to 17% YoY in 3QFY20. Reported spreads improved 20bp QoQ/YoY to 3.3%, driven by better yield and stable cost of funds. PCR increased by 100bp QoQ to 29%. While issues of sand mining and property registration in TN have been resolved, overall housing demand remains weak.

Sector: Housing Finance / Small Cap | Earnings Update 2QFY20 Background: Repco Home Finance Limited (RHFL) is a low to medium ticket size home loan financing company predominately based in tier II / III cities of southern India. Promoted by the State-owned Repco Bank Ltd in 2000, RHFL presently has 148 branches and 27 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 21% CAGR (FY13-FY19) and stood at INR ~114.9bn at the end 2QFY20. RHFL average loan per unit is at INR...