Repco Home Finance
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
REPCO IN
63
18.5 / 0.2
319 / 91
8/90/-27
75
62.9
17 February 2021
3QFY21 Results Update | Sector: Financials
CMP: INR296
TP: INR430 (+45%)
Stable quarter; asset quality surprises positively
Buy
Financials & Valuations (INR b)
Y/E March
2020 2021E
NII
4.9
5.7
PPP
4.2
4.8
PAT
2.8
3.1
EPS (INR)
44.8
49.7
EPS Gr. (%)
19
11
BV/Sh. (INR)
286
332
Ratios
NIM (%)
4.4
4.8
C/I ratio (%)
20.2
18.5
RoAA (%)
2.4
2.5
RoE (%)
16.9
16.1
Payout (%)
7.0
7.0
Valuation
P/E (x)
6.6
6.0
P/BV (x)
1.0
0.9
Div. Yield (%)
0.9
1.0
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
37.1
37.1
DII
20.1
20.2
FII
19.8
19.1
Others
23.0
23.6
FII Includes depository receipts
Repco Home Finance (REPCO)’s PAT grew 14% YoY to INR796m in 3QFY21,
8% above our estimates. The PAT beat was driven by an NII beat,
marginally offset by slightly higher provisions. The quarter gone by was
characterized by a recovery in disbursements, improvement in margin,
and maintenance of asset quality.
From 65–70% of YoY levels in 2QFY21,
disbursements improved to ~85%
of YoY levels to INR5.5b in the quarter.
The share of Home loans in total
disbursements improved 250bp YoY to 80%.
As repayment rates normalized since this was the first full quarter after
the lifting of the moratorium on term loan EMIs, loan growth remained
tepid (flat QoQ, +4% YoY).
The loan mix in terms of customer profession
as well as type of loans (Home/LAP) remains largely stable.
Despite a downward trend in Home loan rates across the industry, yields
increased 20bp QoQ to 11.8%. This, combined with a 30bp decline in the
cost of funds (CoF) to 7.9%, led to record high spreads of 3.9%.
On the borrowings side, REPCO paid down all its market liabilities (NCDs
and CPs) and continues to increase its dependence on NHB borrowings as
they come at a very low rate (6.1%). Over the past year, the share of NHB
borrowings has risen to 17% from 9%.
Contrary to our expectation of asset quality worsening, given the lifting
of the moratorium on term loan EMIs, pro forma GNPL ratio actually
came in flat QoQ at 4%.
In addition, restructured loans amounted to only
0.3% of total loans – better than that reported by most HFCs.
The total provision buffer increased 20bp QoQ/70bp YoY to 2.2%.
With business and collections largely reverting to normal, opex grew 13%
QoQ. Nevertheless, the C/I ratio is healthy at 18.5%.
Growth has slowed down as banks have become aggressive in lending.
Stage 2 loans stood at 7%. GNPL ratio will not cross 4.5% in 4QFY21.
2022E
5.7
4.8
3.2
51.3
3
380
4.6
19.7
2.5
14.4
7.0
5.8
0.8
1.0
Disbursements recover, but loan growth muted; margin surprises
Dec-19
37.1
24.8
28.8
9.3
Stable GNPL ratio a positive surprise
Highlights from the management commentary
Valuation and view
Since the IL&FS crisis, REPCO reduced its dependence on capital market
borrowings to nil at present from 20% earlier. It proactively increased its low-
cost NHB borrowings at the same time, thus maintaining margin. The
management has laid great emphasis on controlling asset quality. While it is
still early days, it seems that the impact of the crisis on asset quality is likely to
be minimal. Credit costs should normalize to 30-40bp in FY22E. However,
growth still remains elusive. While we forecast a pick-up, we expect the
company to deliver only 8% loan book growth over FY21-23E. We increase our
FY22E/FY23E EPS estimate by 2-4% to factor in higher margin. Maintain Buy
with a TP of INR430 per share (1x FY23E BVPS).
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)|
Divya Maheshwari
(Divya.Maheshwari@Motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14 January 2020
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