Buy Repco Home Finance, target price Rs 440: Motilal Oswal

Motilal Oswal has buy call on Repco Home Finance with a target price of Rs 440. The current market price of Repco Home Finance Ltd. is Rs 374.65. 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 2346.05 Crore) operating in NBFC sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 340.34 Crore, down -5.40 % from last quarter Total Income of Rs 359.75 Crore and down -1.67 % from last year same quarter Total Income of Rs 346.11 Crore. Company reported net profit after tax of Rs 63.20 Crore in latest quarter.

Investment Rationale
The brokerage expects loan book growth to remain muted even in FY22E. Improvement in asset quality is encouraging as GS 3 fell below 4% after remaining sticky between 4% and 4.3% for the last seven quarters. The brokerage sees the efforts put in by REPCO to improve collections and achieve resolutions/upgrades in GS 3 reflecting in improved asset quality. Given the investments being made by REPCO in digitization, the brokerage expects it to benefit from productivity improvements and structural enhancements across different stages of the loan lifecycle. Availability of low-cost NHB borrowings will not sustain indefinitely. It expects further benefits from lower incremental cost of borrowings to be limited. It estimates a 12% PAT CAGR over FY21-24E. REPCO trades at 0.85x FY23E P/BV, which is undemanding. It has a Buy rating on the stock with a TP of INR440 (1x FY23E PBVPS).

Promoter/FII Holdings
Promoters held 37.1 per cent stake in the company as of March 31, 2021, while FIIs held 20.4 per cent, DIIs 20.1 per cent and public and others 22.4 per cent.