Shares of Repco Home Finance surged more than 17% in intraday trade on BSE on August 16, buoyed by its strong June quarter result. The stock finally closed 12.22% higher at ₹177.70.
The company's standalone profit for Q1FY23 stood at 62.07 crore, up 93.2% against the profit of ₹32.12 crore reported in the same quarter last year.
However, the company's total income for Q1FY23 slipped 5% year-on-year (YoY) to ₹307 crore against ₹322.39 crore in Q1FY22.
Net interest income stood at ₹137 crore and margins at 4.6% for Q1FY23.
Brokerage firm Phillip Capital believes the stock is poised for growth and can jump about 58% from the current market price.
The brokerage firm has a 'buy' call on the stock with a target price of ₹250.
"Repco home delivered PAT which was above our expectation driven by lower credit cost. The highlight of the quarter was an improvement in asset quality and management’s endeavour to grow loan book," said Phillip Capital.
"The decline in the yield on loan (owing to reset of interest) in order to avoid large balance transfer, some sequential moderation in prepayment rate and better than expected loan growth (though it was marginal) are some of the early signs of growth returning back," the brokerage firm added.
Phillip Capital pointed out that Repco has lagged behind the industry peers in demonstrating business growth. Reviving growth and improving asset quality is the key focus area.
"But being a secured lending business, asset quality is expected to improve and the credit cost to decline. In an effort to bring back the growth momentum and contain its pre-payment rate, the company will need to be competitive in lending rate which would cut the extra bit of NIM it managed during last one year," Phillip Capital said.
The brokerage firm expects Repco to deliver earnings growth of more than 40% and 17% in FY23 and FY24, respectively, and ROE of 11.4% and 12%, respectively, during the similar period.
As per the estimates of Phillip Capital, the stock trades at 0.5 times and 0.4 times FY23 and FY24 ABVPS of ₹329 and ₹387, respectively. It trades at a P/E ratio of 3.7 times and 3.1 times FY23 and FY24 EPS of ₹43 and ₹50, respectively.
According to a MintGenie poll, an average of 10 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations are those of individual analysts or broking firms and not of MintGenie.
