Buy Repco Home Finance, target price Rs 430: Motilal Oswal

Buy Repco Home Finance, target price Rs 430:  Motilal Oswal

Motilal Oswal has buy call on with a target price of Rs 430. The current market price of Repco Home Finance Ltd. is Rs 326.85.

Repco Home Finance Ltd., incorporated in the year 2000, is a Small Cap company (having a market cap of Rs 1912.19 Crore) operating in NBFC sector.

For the quarter ended 31-12-2020, the company reported a Consolidated Total Income of Rs 359.75 Crore, up 2.72 % from last quarter Total Income of Rs 350.22 Crore and up 5.49 % from last year same quarter Total Income of Rs 341.02 Crore. Company reported net profit after tax of Rs 79.60 Crore in latest quarter.

Investment Rationale
Since the IL&FS crisis, REPCO reduced its dependence on capital market borrowings to nil at present from 20% earlier. It proactively increased its lowcost NHB borrowings at the same time, thus maintaining margin. The management has laid great emphasis on controlling asset quality. While it is still early days, it seems that the impact of the crisis on asset quality is likely to be minimal. Credit costs should normalize to 30-40bp in FY22E. However, growth still remains elusive. While the brokerage forecasts a pick-up, it expects the company to deliver only 8% loan book growth over FY21-23E. It increases FY22E/FY23E EPS estimate by 2-4% to factor in higher margin.

Promoter/FII Holdings
Promoters held 37.1 per cent stake in the company as of Dec 31, 2020, while FIIs held 19.8 per cent, DIIs 20.1 per cent and public & others 23 per cent.

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