Khambatta Securities has given Hold recommendation for Home First Finance Company with a target price of Rs. 1003 in its research report issued on Aug 23, 2022

Khambatta Securities’ research report on Home First Finance Company

Home First Finance Company (HFFC) reported solid results as the company made the highest-ever quarterly disbursals in 1Q FY23. AUM registered a robust 35.8% y-o-y growth to reach Rs 5,832 crore as of 31 June 2022. Loan disbursals increased by 117.0% y-o-y to Rs 661 crore during the quarter. NII expanded 44.0% y-o-y to Rs 94.0 crore as net revenues increased 22.2% y-o-y to Rs 108.6 crore. PAT increased 46.0% y-o-y to Rs 51.2 crore. Gross Stage 3 ratio stood at 2.1% as of June-end compared to 2.3% in March 2022. GNPA ratio based on the old classification was 1.2% (vs 1.3% in Mar-22). GNPA provision coverage ratio stood at 45.8% in Jun22 vs 47.1% in Mar-22. PCR without the impact of the new RBI circular was 81.0% in Jun-22 vs 83.6% in Mar-22 and 69.1% in Dec-21. Total CRAR was 52.3% while Tier-1 capital was 51.8% as of June-end. Physical branches and total distribution points increased from 80 to 93 and from 200 to 224, respectively on a q-o-q basis.

Outlook

The HFFC stock has appreciated by 26% since we initiated coverage on the company on 01 February 2022. Marginally revising upward FY24E earnings, we value HFFC at Rs 1,003 (up from Rs 988), implying a FY24E P/E of 35x and P/BV of 4.3x and informing an upside of 6%. Consequently, we change our rating for the stock from BUY to HOLD as we believe, at current levels, the stock is near its fair value.

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