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Motilal Oswal Report
Home First Finance Company India Ltd.'s Q1 FY25 profit after tax grew 27% YoY to Rs 878 million (inline). Net interest income grew 18% YoY to Rs 1.46 billion (in line). Other income grew 34% YoY to Rs 382 million, aided by higher assignment income from better yields on assignments.
Opex grew 18% YoY (in line) to Rs 655 million. Pre-provision operating profit rose ~22% YoY to Rs 1.2 billion (in line). Annualized credit cost stood at ~20 bp (previous year: ~40 bp).
The management shared that it will increase its PLR by 35 bp, effective August 2024. This, adjusted for some repricing in the existing portfolio, could help Home First improve its yield by ~10-15 bp, which will help mitigate the compression in spreads and any residual increase in borrowing costs.
Home First's execution has been consistently better than its peers and it is well positioned to capture the significant opportunity in the affordable housing segment.
We estimate a CAGR of ~31%/~27% in AUM/PAT over FY24-FY26E. Asset quality should strengthen, and credit costs are likely to remain benign over FY25-FY26E. Reiterate Buy with a target price of Rs 1,215 (based on 3.7 times FY26E book value).
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