Basant Maheshwari of ‘Basant Top 10’ and theequitydesk.com shot into fame because his stock picks Page Industries, Hawkins Cooker, Titan Industries and Gruh Finance have delighted investors by giving bumper profits.
Repco has already been a great performer so far. It offered shares in the IPO in March 2013 at the price of Rs. 172 per share. At the CMP of Rs. 340, its investors are already sitting on a fabulous gain of 97% and are grinning from ear to ear.
Let’s now straightaway look at the salient points that Basant Maheshwari makes about Repco:
(i) Good business profile: Repco caters to the small ticket borrowers in the rural and semi-urban areas. This sector is booming thanks to the implantation of the 6th Pay Commission, NREGA, increase in land & gold prices etc;
(ii) Focused management: Repco’s management is clear that their focus is to grow at a reasonable pace without taking unnecessary risks. It wants to grow to saturation point in Tamil Nadu first. Almost 64% of the loan book originates from Tamil Nadu. Tamil Nadu is only 18% of India’s mortgage market and so the potential is enormous;
(iii) Low competition from peers: Repco is relatively free of competitors breathing down its neck. HDFC and LIC Housing are not interested in ticket sizes which are less than Rs. 15 lakhs while Shriram and M&M Financial look at small loans of less than Rs. 5 lakhs. The result is that the mid-market space between Rs. 5 to Rs. 15 lakhs is wide open for Repco to feast on.
(iv) Scorching growth track record: In the past 10 years, Repco has grown its loan book at above 40%. The annualized growth rate for the future is likely to be at 30%;
(v) Low NPAs: Though Repco’s main clientele (54%) are the self-employed people, its NPAs is low at only 0.08% of its total loans of Rs. 4,000 crore. To curb NPAs, Repco has put up an incentive scheme whereby employees are given incentives based on lending and recovery;
Basant Maheshwari makes a number of other interesting points in his article. The core point is about the valuations. At the CMP of Rs. 292 (now Rs. 340), Repco is trading at about 12 times FY 2015 EPS and about 2.1 times FY 2015 book value. These valuations are very reasonable for a company with the growth rate and potential of Repco, Maheshwari says.
So, there is a lot of steam left in Repco Home Finance for latecomers Basant Maheshwari says with a big smile on his face.
So, are you going to grab the stock? (I already have it in my portfolio since the IPO and will add more on declines).