Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities and Mr. Deepak Shinde, Institutional Research Analyst, HDFC Securities
REPCO's 4QFY21 earnings missed our estimates on account of higher-than- expected charge-offs and higher opex. Business growth gained moderate traction with 16% sequential growth in disbursals (INR 64bn in Q4). Asset quality surprised positively with GNPAs declining to 3.7% (pro-forma 3QFY21: 4.3%) and a steady restructured book at 0.3% of loans. REPCO shored up its early-bucket provisions at 0.95% (3QFY21: 0.75%), higher than our expectations. We revise our FY22/FY23 earnings estimates upward by 3.7/8.8%, on the back of improving loan growth and NIMs and lower provisioning on account of the existing build-up in buffers. We maintain our ADD rating with a revised TP of INR 411 (earlier INR 348), valuing the franchise at 1.1x Mar'23 ABVPS.
Benign asset growth and higher opex drive mute PPOP growth: REPCO's operating performance (9% YoY growth in operating profits) was muted on the back of a subdued asset growth (YoY AUM growth at 2.5%). NII grew by 8% YoY, while strong recoveries likely aided the lumpy other income (55% YoY). NIMs were steady at 4.8% (4QFY20: 4.7%), underpinned by funding cost tailwinds. Higher opex was driven by high CSR expense in Q4.
Balance sheet growth gains traction; we increase our estimates: REPCO witnessed moderate revival in its loan growth momentum on the back of a 16% sequential growth in disbursements (INR 64bn in Q4). Its anaemic loan growth over the past couple of years (FY19-FY21 CAGR at 5%) is largely attributed to a benign economic environment, exacerbated by the pandemic. With the easing of the second wave of the pandemic, we expect pick-up in asset growth, factoring in loan growth CAGR of 12.8% over FY22-23E.
Asset quality, prudent provisioning surprises positively: REPCO's GNPA declined sequentially to 3.7% (proforma Q3FY21: 4.3%), with housing/LAP GNPAs at 3.2%/5.6%. Bulk of the incremental provisions during the quarter appear to have been used towards shoring up coverage on early-bucket assets (GS-I and GS-II) by ~20bps to 0.95% (3QFY21: 0.75%), while GS-III PCR also improved to 40% (3QFY21 proforma: 34%).
Shares of REPCO HOME FINANCE LTD. was last trading in BSE at Rs.376 as compared to the previous close of Rs. 368.1. The total number of shares traded during the day was 20862 in over 1099 trades.
The stock hit an intraday high of Rs. 380 and intraday low of 370.65. The net turnover during the day was Rs. 7796202.