Buy Home First Finance; target of Rs 1180: Motilal Oswal

Motilal Oswal’s research report on Home First Finance

Home First Finance’s 3QFY24 PAT grew 35% YoY to INR788m (in line), while its 9MFY24 PAT rose ~35% YoY to INR2.2b. NII rose ~21% YoY to INR1.34b (in line). Non-interest income (25% beat) jumped 140% YoY, led primarily by higher assignment income and treasury income. Opex (in line) grew 38% YoY to INR611m while PPoP grew ~35% YoY to INR1.1b. Credit costs of INR70m (in line) translated into annualized credit costs of ~30bp (PQ: ~40bp). HomeFirst continued to build its distribution by taking steps to strengthen its presence in UP and MP. It has also been investing in technology and analytics to improve its underwriting and credit assessment capabilities. Steady execution has positioned HomeFirst well to capture the significant opportunity in the affordable housing segment.

Outlook

We model an AUM/PAT CAGR of ~31%/~28% over FY23-FY26E. Asset quality should strengthen, and credit costs are likely to remain benign over FY25-FY26E. Reiterate BUY with a TP of INR1,180 (based on 3.6x FY26E BV).

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Home First Finance – 21012024 – moti