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Systematix Report
Home First Finance Company Ltd.'s Q3 FY24 operational performance was in-line with our estimates. Higher other income compensates for lower spreads. Net interest income/ operating profit came in at Rs 1.34 billion/ 1.09 billion versus estimate of Rs1.40 billion/ 1.07 billion.
NII reported healthy growth of 21% YoY (2% QoQ) at Rs 1.3 billion aided by 34% YoY growth in asset under management.
The operating performance during the quarter was healthy despite contraction in margins (~30 basis points QoQ decline) aided by higher assignment income and treasury income (other income grew 137% YoY).
Opex to AUM ratio was steady QoQ at 2.8%. Asset quality stood steady QoQ with gross stage-III/net stage III at 1.7%/1.2%. Provisioning coverage ratio on stage-III assets was largely steady at ~30%.
While one plus days past dues remained steady QoQ at 4.5%, bounce rate increased to 15.1% from 14.2% in Q2 and further increased to 15.3% in January-24.
Strong growth in business with healthy operational efficiency should aid its earnings and return ratios ahead.
We estimate 33% compound annual growth rate in AUM to drive 26% CAGR in earnings over FY23-FY26 with return on assets/ return on equity of ~3%/~18%.
We retain our 'Buy' rating and increase our target price of Rs.1,200 (from Rs.1,100) as we rollover to March-26, valuing the company at ~3.75 times FY26E book value.
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