Home First Finance Company's loan growth has decelerated significantly from ~35% to ~25% YoY driving valuation de-rating, highlights HDFC Securities. Disbursements growth has witnessed an uptick, which is likely to sustain driven by company's initiatives and improving demand. To that extent, current valuations provide favorable risk-reward. Profitability has largely remained intact, with compression in RoE due to capital raise.
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HDFC Securities Institutional Equities
HDFC Securities has upgraded Home First Finance Company India Ltd.'s rating from Reduce to Add, with RI-based target price of Rs 1,250, implying 2.3 times Sep-28 adjusted book-value-per-share; 15x Sep-28 EPS.
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According to the brokerage Home First Finance Company is poised to deliver ~25% assets under management compound annual growth rate over FY27-FY29E on the back of increased investments in distribution post peaking of volume productivity metrics, gradually improving demand, and geographical diversification.
With ~84% of AUM as home loans, Home First Finance Company has significant headroom for product diversification, along with co-lending (currently sub-5% of disbursements) to expand the addressable market.
Operating efficiency is likely to remain steady at current levels, with limited room for improvement, going ahead, while RoE is likely to improve with increasing leverage.
Valuation de-rating from 4.0 times to 2.3x one-year forward price/book-value, along with improving visibility of growth amid steady profitability, provides favorable risk-reward.
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