Buy Home First Finance. 1180 rupees target: Motilal Oswal

Motilal Oswal’s research report on Home First Finance

Home First Finance’s Q3FY24 PAT grew by 35% YoY to Rs 788 million (inline) and Q9FY24 PAT grew by around 35% YoY to Rs 2.2 billion Ta. NII rose about 21% year-on-year to Rs 1.34 billion (inline). Non-interest income (25% beat) increased by 140% year-on-year, primarily due to increases in capital gains and treasury income. Opex (inline) increased by 38% year-on-year to 611 million rupees, while PPoP increased by about 35% year-on-year to 1.1 billion rupees. The credit cost of Rs 70 million (inline) translates into an annualized credit cost of approximately 30bp (PQ: approximately 40bp). HomeFirst continued to build its distribution by taking steps to strengthen its presence in UP and MP. We have also invested in technology and analytics to improve our underwriting and credit scoring capabilities. With steady execution, HomeFirst is well-positioned to capture significant opportunities in the affordable housing segment.

Outlook

We model the AUM/PAT CAGR from FY2023 to FY2026 to be approximately 31%/approximately 28%. Asset quality should strengthen and credit costs are likely to remain favorable through FY25-26. Reiterate ‘buy’ at TP $1,180 (based on 3.6x FY26 BV).

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Home First Finance – 21012024 – moti