Saturday, July 13, 2024
HomeBusinessRepco Home Finance Rating 'Buy'; Q4 earnings were above estimates

Repco Home Finance Rating ‘Buy’; Q4 earnings were above estimates


Related stories

Gracie Bon: A Rising Star in the Fitness and Wellness Industry

Gracie Bon is a name that has been making...

Dimple Malhan- Personal and Professional life!!

Famous Vlogger recognised for Dimple's Kitchen YouTube channel. She...

Tips for Writing an Impactful Resume After a Long Career Break

Sometimes, it is necessary to take a career break...

Top 4 Reasons Your Business Should Have a Social Media Manager

Whether you decide to hire an in-house social media...


Also, competitive intensity as well as Repco’s high lending rate vs peers is leading to elevated balance transfer (outward) at Rs 4-5 bn resulting in lower net portfolio accretion.

Repco Home Finance’s (Repco’s) Q4FY21 earnings exceeded our expectations with PAT growth of 33% y-o-y (3% earnings growth for FY21). Stage-3 pool being contained at 3.7% and credit cost managed sub-1% for Q4FY21 and 0.7% for FY21 came in as a positive surprise. However, Covid second wave disruption and extended impact in Tamil Nadu throw in uncertainty for FY22. Disbursements failed to cheer with a mere 6% y/y growth in Q4FY21 (down 30% in FY21). This coupled with elevated balance transfer weighed on AUM growth (2% for FY21).

Though growth momentum lags peers, superior NIM and lower credit cost can sustain Repco’s RoAs at >2% and RoEs at >13%. We believe the company’s business franchise is currently undervalued – stock trades below FY23E book and 7x earnings, and is available at <0.2x AUM. Maintain Buy with a target price of Rs 650. Key risks: fundamentally weak performance derailing growth, and quality of credit amidst Covid disruption.

Stage-3 pool well contained; Covid second wave disruption key monitorable: Against the apprehension of rise in stage-3 assets, the pool was contained at 3.7% in Q4FY21 vs Q3FY21 proforma stage-3 of 4.3%. Collection efficiency in Q4FY21 was near pre-Covid levels of 95-96%. Second wave disruption would however have derailed collection efficiency in Q1FY22. We expect stage-3 pool at 5-6% in the initial part of FY22.

FY21 credit cost at less than 70bps: Credit cost of Rs 292 mn (sub-1% for Q4FY21) was primarily towards stages-1/2 assets, thereby exiting FY21 with credit cost at less than 70bps. It carries management overlay of Rs 425 mn (35bps of advances). Overall, Repco is carrying cumulative provisions of 2.4% against stage-3 assets of 3.7%. We are building in credit cost of 1.4%/0.6% for FY22e/ FY23e respectively. Restructuring was stable at 0.3% (included in stage-3), but restructuring under resolution framework 2.0 (not coexisting with moratorium) can be relatively higher in FY22.

See also  Andrew Ross Sorkin on meme stocks, bitcoin, SPACs, antitrust, and Elon

AUM growth moderate as low disbursements and high balance transfer weighs: Disbursements grew by only 6% y-o-y in Q4FY21 thereby exiting FY21 with 30% lower disbursements vis-à-vis FY20. Against the guided monthly disbursement run-rate of Rs 2.2-2.5 bn, Q4FY21 disbursements were marginally lower at Rs 6.4 bn due to Tamil Nadu election impact.

Consequently, loanbook growth further moderated to 2% (from 5-7%) to Rs 121 bn (almost flat q-o-q), which shows that the company is still very conservative in lending compared to peers. In terms of geographical distribution, Maharashtra and Gujarat loanbooks have grown in the range of 7-9%, while southern states derailed the momentum. Also, competitive intensity as well as Repco’s high lending rate vs peers is leading to elevated balance transfer (outward) at Rs 4-5 bn resulting in lower net portfolio accretion. Going forward, we are building in loan growth of 2% and 6% for FY22e and FY23e respectively.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.


Source link

Bellie Brown
Bellie Brown
Hi my lovely readers, I am Bellie brown editor and writer of I write blogs on various niches such as business, technology, lifestyle., health, entertainment, etc as well as manage the daily reports of the website. I am very addicted to my work which makes me keen on reading and writing on the very latest and trending topics. One can check my more writings by visiting

Latest stories