18 Feb , 2022 By : Kanchan Joshi
Repco Home Finance's Growth strategy and business initiatives are to be watched out closely as those would set the stage for earnings momentum as the company's new CEO is likely to join with effect from April 22, said brokerage house ICICI Securities.
“The company’s business franchise is currently undervalued – the stock trades below FY23E book and 5x earnings," the note added. The domestic brokerage and research firm has maintained its Buy rating on the financial stock with a revised target price of Rs563, implying a potential upside of giving multibagger return of about 140 percent.
Though, Fundamentally weak performance derailing growth, and behaviour of the restructured portfolio could act as key risks, as per ICICI Securities. Further, performance of restructured portfolio and movement in it would be a key monitorable going forward, it said.
Repco Home Finance (Repco) has disappointed on most operating metrics in Q3FY22. Not only did excess provisioning of Rs700mn on incremental GNPAs (as per revised asset classification norms) led to elevated credit cost of greater than 250bps, but also lagged growth, NIM compression and elevated opex dragged earnings, the brokerage highlighted.
Post the revised asset classification norms, GNPAs spiked to 7 percent vs reported stage-3 of 4.6 percent (4.3 percent in Q2FY22). Growth momentum lagged peers considerably, only HFC where disbursements were down 19.5 percent year-on-year (YoY) / 8percent QoQ and loan book was down 2.3 percent quarter-on-quarter (QoQ). However, change in management was key and could act as positive trigger, believes ICICI Securities.
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