Brokerage house ICICI Securities said Repco Home Finance’s growth strategy and business initiatives should be closely watched as these will set the stage for earnings momentum as the new CEO of the company is likely to be effective from April 22.
“The company’s business franchise is currently undervalued – stock trades below FY23E book and 5x earnings,” the note said. The domestic brokerage and research firm has maintained its buy rating on the financial stock with a revised target price. 563, Possible upside signal of giving multibagger returns Around 140%.
However, according to ICICI Securities, fundamentally weak performance affects growth, and the behavior of the restructured portfolio can act as a major risk factor. In addition, the performance and movement of the restructured portfolio will be a key monitorable going forward, it said.
Repco Home Finance (Repco) has disappointed on most of the operating metrics in Q3 FY22. Brokerage highlights, the additional provision of Rs 700 million on incremental GNPA (as per revised asset classification norms) not only resulted in increased credit cost of >250 bps but also reduced growth, NIM compression and elevated OPEX drag earnings .
Post the revised asset classification norms, GNPAs reported in Phase-3 of 7% versus 4.6% (4.3% in Q2FY22). The pace of growth lagged significantly behind peers, with only HFCs where disbursements were down 19.5% year-on-year (YoY) / 8% QoQ and loan book was down 2.3% quarter-on-quarter (QoQ). However, the change in management was significant and ICICI Securities believes it could act as a positive trigger.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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