Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,274.20569.4
Stock Analysis, IPO, Mutual Funds, Bonds & More

Elara Capital has ‘accumulate’ rating on Repco Home, target Rs 390

Loan book growth remains soft at 13% YoY for 1QFY20, as home state (Tamil Nadu) woes increase post the recent draught.

ETMarkets.com|
Updated: Aug 20, 2019, 01.13 PM IST
0Comments
Getty Images
GettyImages-948486878
Our concerns on Repco are, a continued subdued growth in TN, a late diversification outside home state followed by an aggressive growth and stickiness in NPA with inadequate provisioning.
Elara Capital has given an ‘accumulate’ rating on Repco Home Finance with a target price Rs 390, saying that recent correction provides upside potential for the stock even though growth would be key to the company’s earnings revival, which is expected at a CAGR of 12% of FY19-21E.

Key Financials:

Repco Home Finance reported a PAT of INR 624mn, up 2% YoY and in-line with our estimates. Loan growth remains subdued at 13% YOY, but an expansion in spread, given the macro was the key positive. NPAs remain sticky, up 120 bps QoQ to 4.2%, with a quick revival not in the offing, in our view

Loan book growth remains soft at 13% YoY for 1QFY20, as home state (Tamil Nadu) woes increase post the recent draught. Tamil Nadu share has come off by 2% YoY, but still remains high at ~57%, which is growing at 8%, thus impacting overall growth. Beyond TN, growth remains strong at 28%, with higher contribution from flood affected states of Karnataka and Gujarat. Growth in Maharashtra remains strong at 27%, though concerning, as peer HFCs in the affordable segment in the state have been reporting elevated NPAs. We see still high share of TN impacting growth and expect a 12% loan book CAGR over FY19-21E.

Asset quality

The elevated levels of NPA have been on books since last two years, with ~70% from the home state and majority in the high ticket LAP segment. We see lower probability of recovering the same, with additional pressure from growth in newer geographies, especially from the flood affected Karnataka (14% of book) and Gujarat. We are currently building credit cost of 0.2% (peak of 0.7%) and see this as the key risk to our already subdued earnings forecast of 9% for FY20e.

Valuations

Our concerns on Repco are, a continued subdued growth in TN, a late diversification outside home state followed by an aggressive growth and stickiness in NPA with inadequate provisioning. Higher than build-in credit costs is the key risk to our already subdued earnings forecast. The recent correction provides an upside to the target Price of Rs 390, it said.

Also Read

Buy NIIT, target Rs 183: Elara Capital

Buy DCB Bank, target Rs 276: Elara Capital

Sell Lupin, target Rs 800: Elara Capital

Buy Zensar Technologies, target Rs 340: Elara Capital

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
Disclaimer: This recommendation is analyst's own and does not represent those of economictimes.com & ETMarkets.com. Please consult your financial advisor before taking any position in the stock/s mentioned.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service