Softening stance but guidance intact
The management has hinted towards the possibility of falling short of advances guidance if repayment rates remain high. Its loan portfolio guidance of INR15,000cr may fall short by ~INR100-200cr. Nevertheless, it is confident of achieving ~INR3,800cr of disbursements in FY25 given the increase in its sales strength in coming quarters. (For the year, INR1,500cr will be an increase in the book, with INR2,000cr of repayment anticipated).
Operating metrics to remain stable
The management guided that NIM will be protected with higher yields as it is resetting its PLR on a quarterly basis. REPCO is hopeful of getting its borrowing sanctioned through NHB as it is meeting all the required criteria. Opex will stay as guided with a C/I ratio of ~24%. It has started expanding its collections team and is guiding at lowering GNPA to INR450cr (from INR580cr QoQ) and Stage-2 to 10% by FY25-end. Credit cost will stay subdued (on additional write backs in coming quarters), thus driving profitability.
Valuation and view
REPCO reported steady credit growth aided by greater disbursements despite a higher repayment. The management has softened its stance on AUM growth but reiterated its operating metrics guidance. We expect minimal to negative credit cost to drive profitability. The franchise is the beneficiary of tailwinds in the housing sector aided by a credit linked subsidy scheme and NHB funding in Budget 2024. We retain ‘BUY’ with a TP of INR610, an upside of 32% from its CMP.
Repco Home Finance is the beneficiary of tailwinds in the housing sector
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