Repco Home Finance soars 70% in three months; Stock at 7 month high

Repco Home Finance shareholders were ecstatic with its stock performance over the last three months. Since June, the share price of Repco Home Finance has risen gradually from ₹138.60 to the current level of ₹235.20, representing an increase of about 69.69 percent.

After reaching a 52-week high of ₹333.9 on October 12, 2021, the stock began to fall and continued to slide until June of this year, when it dropped to ₹113.4, a 52-week low. However, the stock has seen a surge in buying since June 23, rising 107.23% to date. Nonetheless, it is 31.27% lower than its 52-week high.

The stock lost the majority of its value between the month of February and June after reporting a 60% drop in net profit year on year to ₹31.47 crore in Q3FY22. The losses continued in Q4FY22 as it posted a net profit of ₹42.03 crore against a net profit of ₹63.2 crore for the same quarter of last year. However, it is a better number than Q3FY22.

In the first quarter of FY23, the company surprised the street with a net profit of ₹62.07 crore, up 93.45% year on year, compared to a profit of ₹32.1 crore in the same period last year. Before its Q1 announcement, the street expected better numbers, and the company surprised all estimates made by the analysts. From August 12 to August 25, the stock price increased by 72.03 percent, rising from ₹158.25 levels to ₹272.25 in just eight trading sessions.

The Loans sanctions stood at Rs. 690.9 crore, registering a strong growth of 236%. Loan disbursements stood at Rs. 642.2 crore, registering a growth of 168%. The interest spread stood at 3.3%. The gross NPA stands at ₹763.2 crore as on June 30, 2022. The gross non-performing assets (NPA) ratio was at about 6.4% of the loan assets as of June 30, 2022. The net NPA ratio stood at about 4.2%.

On the technical charts, the stock is trading 12.40 percent higher than its 200-day moving average of ₹204.20, with a 50-day moving average of ₹176.5. The stock, on the other hand, has a Relative Strength Index (RSI) of 61.4.

Domestic brokerage firm ICICI Securities is bullish on the stock after Q1 numbers. The brokerage firm has a target price of ₹470/share.

The brokerage firm said that Repco Home Finance beat their estimates in terms of PAT. "Under the leadership of the new MD & CEO, Mr. K. Swaminathan, the growth strategy seems to be delivering the right results," said ICICI Securities.

HDFC Securities said the company's Q1 earnings were ahead of their estimates due to improved traction in disbursals and lower credit costs. REPCO’s disbursals, which had been muted for a while and were increasingly a cause of concern, rebounded and clocked in at ₹6bn for a second straight quarter. NIMs clocked in at 4.6%, witnessing a 50bps QoQ compression driven by higher competitive intensity for its prime customers," said HDFC securities.

The new MD & CEO has guided for improvement in franchise performance with steady double-digit loan growth, concomitant with healthy asset quality. Several initiatives have been launched, such as regional-level approvals, activation of DSAs for sourcing, etc. for originations. However, “We await signs of sustained margin reflation and loan growth to become more constructive in our estimates and steady-state franchise earnings profile,” the brokerage firm added.

Repco Home Finance Ltd (RHFL) is a professionally managed housing finance company headquartered in Chennai, Tamil Nadu. The company is registered as a housing finance company with the NHB. The company is present in 2 segments—individual home loans and loans against property (LAP).

As of the end of March 2022, RHFL is operating through 155 branches and 24 satellite centres in Tamil Nadu, Andhra Pradesh, Telangana, and other 10 states across India, its website shows.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.