Home First Finance Shares Downgraded To 'Reduce' By Dolat Capital Post Q1 Results — Check Target Price
With the sharp run-up in Home First's stock price post equity raise, valuations are higher vs peers even as RoE has moderated, adds Dolat Capital
FY26E earnings are expected to benefit from reduced leverage following the recent capital raise. Spreads should strengthen over the year as CoF reduce but yield pressures will be a key monitorable as competitive intensity remains elevated. We value Home First Finance at 2.8x FY27E P/book value.
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Dolat Capital Report
Home First Finance Company India Ltd. reported improved profitability with RoA of 3.7%, driven by decreased borrowing requirement post equity raise. Spreads were steady QoQ at 5%. Disbursement growth slowed down to 7% YoY, while loan growth at 6% QoQ/28% YoY was robust. Asset quality trends weakened with rise in early delinquency (90bps rise in 1+ dpd to 5.4%) and reduced provision coverage ratio against stage-3 assets.
While 30-40 bps (of the 90 bps) rise in delinquency is seasonal, a few markets (Surat/Coimbatore/Tirupur) had a higher uptick in dpd. However, things have been normalizing since July. Disbursements were slower in April (led by Tamil Nadu/ Telangana) but normalized from May. Management guides for ~20 bps YoY decline in CoF in FY26E.
We tweak estimates and value the Home First Company at 2.8x FY27E P/BV, with unrevised target price of Rs 1340. However, with the sharp run-up in price post equity raise, valuations are higher vs peers even as RoE has moderated.
We downward revise our rating to ‘Reduce’ from Accumulate against RoA/RoE of 3.6%/15% for FY27E.
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