Repco Home Finance Gains 30% In Three Days As Q1 'Surprises Positively'
The company posted a net profit of Rs 62.07 crore in the quarter ended June, up over 47% from the previous quarter.
Shares of Repco Home Finance Ltd. surged over 30% in three sessions after HDFC Securities said the Chennai-based lender's Q1 earnings "surprised positively after a slew of disappointing performances over the past few quarters".
The company posted a net profit of Rs 62.07 crore in the quarter ended June, up more than 47% over the previous three months.
Key Highlights (QoQ)
Net interest income down 3.3% to Rs 297.9 crore.
Net interest margin at 4.6%, down 50 bps.
Overall loan book stood at Rs 11,861.9 crore.
HDFC Securities said Repco's earnings were ahead of its estimates due to "improved traction in disbursals and lower credit costs".
"Repco's disbursals, which had been muted for a while and were increasingly a cause of concern, rebounded and clocked in at over Rs 600 crore for a second straight quarter," the brokerage said in a report titled 'Turning The Corner; Sustained Execution Key To Rerating'.
HDFC Securities maintained its 'buy' rating on the stock with a reduced target price of Rs 274, implying a potential upside of 47.3%.
It also said the new chief executive officer has guided for improvement in franchise performance with steady double-digit loan growth, concomitant with healthy asset quality. "Several initiatives have been launched such as regional-level approvals, activation of direct selling agents for sourcing, etc. for originations. However, we await signs of sustained margin reflation and loan growth to turn more constructive in our estimates and steady-state franchise earnings profile."
Shares of the company gained 17.5%, 14.3% and 13% intraday over Tuesday, Wednesday and Thursday, respectively. From Tuesday's open of Rs 159.8 to Thursday's intraday high of Rs 209.9, the stock has gained over 31%. It closed 10.9% higher on Thursday.
Of the 13 analysts tracking the company, 11 maintain a 'buy' and two suggest a 'hold', according to Bloomberg data. The 12-month consensus price target implies an upside of 19.5%.
Here's what other analysts made of the company's Q1 results:
Maintains 'buy’ with a new target price of Rs 230 (earlier Rs 210), implying a potential upside of 24%.
Repco Home Finance loan book grew by 5% QoQ led by higher disbursements and lower repayments. Asset quality improved with gross stage 3 assets at 6.4% vs 7% QoQ, as per RBI classification norms.
Covid-19 second wave impact has been higher on asset quality along with competitive pressures on AUM growth.
Revise estimates slightly upwards (up 2% FY24).
Need to watch for slippages from restructured assets. Valuations remain comfortable at 0.5x FY22.
Growth guidance maintained at 10-11% for FY23 (Rs 13,000 crore) loan book by year-end) - branch addition to resume, but no explicit branch addition target
Company has made key critical growth-enabling changes in operations like simplification of processes, faster property profile verification, loan sanction delegation at regional level (up to certain ticket), 2-tier structure of sanctioning (more independent) and emphasis on DSA channel.Bank l
Loans are largely MCLR linked and thus repricing would be slower and possibly lower - National Housing Bank has also increased rates due to repo hikes.