01 Aug Buy Home First Finance; target of Rs 1010 : Motilal Oswal
Buy
Motilal Oswal’s research report on Home First Finance
Home First Finance (HomeFirst)’s 1QFY24 PAT grew 35% YoY to INR692m (in line). NII rose 33% YoY to INR1.25b (5% beat). Non-interest income jumped 94% YoY, driven by higher assignment income and advertisement income. Opex rose 43% YoY (11% above est.), due to new branch openings, addition of manpower and resultant higher employee expenses. PPoP grew 40% YoY to INR978m (6% beat). Annualized credit costs stood at ~40bp (PY: ~30bp). HomeFirst has been opening new branches and expanding its distribution network in Tier 2/3 cities. It has also been investing in technology and analytics to improve its underwriting and credit assessment capabilities, which will help the company target right customers in these markets. A strong and steady execution positions HomeFirst well to capture the significant opportunity in the affordable housing segment. We model an AUM/PAT CAGR of ~32%/~27% over FY23-FY25E.
Outlook
HomeFirst’s asset quality should strengthen and credit costs are likely to remain benign over FY24-FY25E. We cut our FY24/25 EPS estimates by 2%/3% to factor in higher operating expenses. Reiterate BUY with a TP of INR1,010 (premised on 3.7x FY25E BVPS).
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