Repco Home Finance Ltd. share price target

We maintain BUY with a revised TP of Rs 804 (3.3x Mar-19E ABV of Rs 244). Repcos 1QFY18 net earnings fell short of our estimates owing to lower NII, as disbursements declined 17.5%, resulting in loan book growth of 0.7/13% QoQ/YoY. Also, asset quality deteriorated, with GNPAs slipping back to the demonetisation level of 4%, from 2.6% in 4QFY18.

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 125 branches and 32 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 26% CAGR (FY13-FY17) and stood at INR ~90bn at the end 1QFY18. RHFL average loan per unit is...

Loan growth at multi-year lows but outlook stays positive: REPCO'S loan book recorded slowest growth since inception, expanding at ~16%YoY in FY17. The slow growth was a result of temporary disruption caused by a combination of socio-economic and legal factors which affected REPCO's target consumer segment. However, with overall scenario rapidly normalizing and government offering upfront incentives for affordable home buyers, REPCO management believes it can touch 20%YoY growth in FY18E....

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 125 branches and 32 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 26% CAGR (FY13-FY17) and stood at INR ~89.4bn at the end 4QFY17. RHFL average loan per unit...

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 121 branches and 32 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 29% CAGR (FY12-FY16) and stood at INR ~86.6bn at the end 3QFY17. RHFL average loan per unit is...

Repco Home Finance is a niche player in the small-ticket housing finance market (median Rs 0.8 mn). It focusses on underserved markets, especially the self-employed in Tier II and III cities. Factors like low mortgage penetration, government?s impetus for Housing for All and incentives for affordable housing bode well for Repco.

REPCO Home Finance is a midsized Housing Finance Company (HFC), with focus on the underserved self-employed segment. While the current operations of the company are predominately concentrated in Southern market (90%), the management intends to gradually venture into other geographies over the next 5 years. The target segment of REPCO is h..

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 121 branches and 32 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 29% CAGR (FY12-FY16) and stood at INR ~86.6bn at the end 3QFY17. RHFL average loan per unit...

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 151 branches and 31 satellite centers of which ~87% are located in the southern market. Repco has shown robust growth in its loan book clocking 29% CAGR (FY12-FY16) and stood at INR ~79.5bn at the end 1QFY17. RHFL average loan per unit...

Repco Home Finance’s (REPCO) 1QFY17 PAT grew 30.8% YoY (5% beat), driven by strong NII growth (+27% YoY, 3% beat) and significant cost control. Moreover, operating expenses declined 3.5% YoY (20% miss). Business momentum remained healthy, with the loan book up 26% YoY to INR79.6b, in line with prior quarters’ growth trajectory. However, sanctions and disbursements in 1QFY17 grew only 3% each due to the impact of Tamil Nadu state elections. However, management expects disbursement growth to pick up going forward. The loan mix shifted marginally toward self-employed (59.1% share v/s 57.1% in 1QFY16). The share of LAP loans also increased marginally to 20.1%. Margins remained stable YoY at 4.3%. Asset quality remained stable YoY with GNPLs at 2.22% (also 2.22% in 1QFY16). However, REPCO made provisions of INR179m v/s INR113m in 1QFY16 in order to increase PCR, which stood 45.1% v/s 41.8% last year. Operating expenses fell 3.5% YoY, with an equivalent decline in both employee and other operating expenses. As a result, C/I ratio declined ~500bp YoY to 16.2%.Motilal Oswal Maintain Buy with a TP of INR966/share (4.5x FY18 BV).