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Dolat Capital Report
Home First Finance Company India Ltd. reported a steady quarter with assets under management growth of 7% QoQ/34% YoY, in-line operating metrics (return on assets at 3.4%), and stable asset quality metrics. Yields benefitted from 35 bps PLR hike effective August-2024. Spreads were stable QoQ at 5.1% as yield improvement of 10 basis point was offset by a similar rise in CoF.
Asset quality metrics remained steady with gross non-performing assets/Net non-performing assets at 1.7%/1.3% (stable QoQ) and contained early bucket delinquencies (1+/30+ days past due steady at 4.5% and 2.8% respectively). Low credit costs at 25 bps continued to benefit from the decline in stage-3 PCR (-350 bps YoY). Sequential growth was equally distributed across LAP and HL portfolios.
We retain our estimates and maintain ‘Accumulate' rating with revised target price of Rs 1250, valuing the HFC at 3.4 times Septemper-26E price to book value (from 3.3 times earlier), against return on assets/return on equity of 3.4%/18%. With low cyclicality in their earnings, HFCs could be key beneficiaries of normalizing credit environment (rising credit costs). Valuation factor in industry leading growth metrics, offset by relatively modest RoAs.
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