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Dolat Capital Report
Home First Finance Company Ltd. reported steady quarter with strong assets under management growth of 8% QoQ/34% YoY, stable asset quality metrics Ltd., and healthy return on assets of 3.7%. Lower provisions were mostly led by slight decline in provisioning coverage ratio across stage II and III assets. Balance transfer-outs at 7.5% moderated versus last quarter (8.6%) but remains above earlier averages.
Despite rising loan against property share (+ 14% QoQ) and limited rise in close of business (+ 10 basis points), reported yields and spreads moderated QoQ. Spreads stood at 5.3% versus management guidance of more than 5.25%, partly alluding to competitive pressures.
We factor in slightly lower spreads versus earlier, resulting 3-4% lower earnings for FY25/26E. Rating has been revised to 'Accumulate' from 'Buy' driven by rich valuations with target price of Rs 1160 (Rs 1170 earlier), valuing the stock at 3.8 times September25E price/book value.
The stock trades at 3.3 times price/book value against RoA/return on equity of 3.8%/17% for FY25E.
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