Home First Finance - Q1 FY22 Result Report - YES Securities

(Rating: BUY, TP: Rs 750, Upside: 25.0%)

Stronger-than-expected execution on growth and asset quality to induce re-rating

- Disbursements at Rs3.05bn were higher than our estimate of Rs2.5bn, and thus AUM growth exceeded expectations at 3.7% qoq and 18.5% yoy.

- Restructuring stood at 60 bps of AUM and these loans reside in the current bucket (0 dpd). 1+ dpd portfolio increased to 8.9% from 6.2% as of March and swelling of PAR 30-90 bucket was restrained.

- Collection efficiency having improved to 97.6% in June (dipped in April-May to 94-95%) and bounce rate having declined to 16% in July (from 18% in Q1 FY22) indicate that forward movement in stress buckets should ebb.

- Resilient execution on growth and asset quality in a testing period should inspire investors' confidence on HomeFirst's operations, underwriting and collections. Consistency of such performance will re-rate the stock.

- There is longevity to HomeFirst's growth run from a sharp focus, strong processes, large addressable opportunity and low competition.

- Valuation of 3.2x FY23 P/ABV does not fully capture structural growth and profitability prospects.

- We hold a high-conviction BUY and have raised 12m price target to Rs750 on assigning a slightly higher multiple now (influenced by the resilient show).

Shares of Home First Finance Company India Limited was last trading in BSE at Rs. 594 as compared to the previous close of Rs. 600.25. The total number of shares traded during the day was 30065 in over 2740 trades.

The stock hit an intraday high of Rs. 604.85 and intraday low of 589.95. The net turnover during the day was Rs. 17900740.

Source : Equity Bulls

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