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Motilal Oswal’s Research Report on Home First Finance
Profit for Q1FY25 increased 27% YoY to INR 878 million (as expected). Net profit increased 18% YoY to INR 1,460 million (as expected). Other income increased 34% YoY to INR 382 million supported by higher disposition income due to improved disposition yields. Operating expenses increased 18% YoY to INR 655 million (as expected). Accounts payable increased approximately 22% YoY to INR 1,200 million (as expected). Annualized credit costs were approximately 20 bps (approximately 40 bps YoY). Management announced a 35 bps increase in PLR effective August 2024. This is an adjusted portion of the repricing of the existing portfolio, which will help HomeFirst improve yields by approximately 10-15 bps and help mitigate spread compression and residual increase in borrowing costs.
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Outlook
We reiterate our buy rating on the stock with a target price of INR1,215 (assuming 3.7x projected BVPS March ’26).The key downside risks are a) sharp compression in spreads and margins to maintain business momentum and b) slower AUM growth due to higher BT outs.
For the full recommendations report, click here
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Home First Finance_29072024_Motilal Oswal