Buy Home First Finance. Rs 900 target: Motilal Oswal

Finance


Motilal Oswal is bullish on Home First Finance’s recommended share buy valuation, with a target price of Rs 900, in a research report dated 4 May 2023.

Motilal Oswal Research Report on Home First Finance

HomeFirst’s PAT in Q4 FY2023 increased by 6% year-on-year and 9% quarter-on-quarter to Rs.640 crore. Adjusted PAT (after excluding the benefit of the fourth quarter 2022 tax rate change) increased 33% year over year. PAT for FY2011 will increase by 21% from the previous year to INR 2.9 billion (PY: INR 1.9 billion for FY2010). Annualized cost of credit was 48bp (PQ: 44bp). NII grew 31% year-on-year to INR1.12b. Non-interest income increased 55% year-over-year, primarily driven by increased commission and advertising revenue. Operating expenses in Q4 2023 were up 30% year-on-year due to investments in new branches and the resulting increase in staff costs. PPoP grew 38% year-on-year to Rs.910 crore. HomeFirst is expanding its distribution network by opening new branches in Tier 2/3 cities. We are also investing in technology and analytics to improve our underwriting and credit rating capabilities to help target the right customers in these markets. A strong and consistent execution will allow the company to seize significant opportunities in the affordable housing segment.


Outlook

We model AUM/PAT CAGR of ~31%/~27% for FY2023-25. HomeFirst asset quality should strengthen and credit costs are likely to remain low in FY24-25. We raise our 2024/25 EPS forecast by 4%/3% to factor in loan growth and higher other income. Repeat BUY with TP of INR900 (assuming 3.3x FY25E BVPS).

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Home First Finance – 04 -05 – 2023 – moti




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