Housing Finance Franchisee Stock's AUM Grew To 36%, Buy For 34% Upside: Motilal Oswal

Reputed brokerage firm Motilal Oswal has given a buy rating to the stock of Home First Finance. The company is among the few high-quality and transparent franchises in the listed Affordable Housing Finance sector. Particularly, the company has demonstrated consistent execution on its guided metrics, across AUM growth, margins/spreads, asset quality, and credit costs.

Stock To Buy: Target Price

The Current Market Price (CMP) of Home First Finance is around Rs. 671. Motilal Oswal has estimated a Target Price for the stock at Rs. 900. This stock has the potential to give a 34% return, in the upcoming 12 months. This mid-cap stock has a market capitalization of Rs. 6,294 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 671
97Target Price	Rs. 900
Potential Upside	34.00%
52-week high share price	Rs. 1,004.55
52-week low share price	Rs. 620

Quarterly earnings

Its disbursements grew 36% YoY to Rs. 7b, leading to an AUM growth of 36% YoY to Rs. 62.8b. AUM growth was marginally impacted by subsidy received under the PMAY scheme. We model an AUM/PAT CAGR of ~30%/~23%, respectively, over FY22-FY25E. HomeFirst's asset quality should exhibit strength and credit costs are likely to remain benign over FY23E-FY25E as there are no sticky NPAs from the past.

Stock Valuation

"With an RoA/RoE profile of 3.8%/15.6% by FY25E, we believe that the current valuation of 2.9x FY24E P/BV presents an attractive entry point to a quality franchise. Reiterate buy with a target price of Rs. 900 premised on 3.5x, Sep'24E BVPS. Key downside risk is a sharp contraction in spreads/margins due to its inability to pass on higher borrowing costs to sustain business momentum and avoid higher delinquencies," giving a buy rating, Motilal Oswal stated.

About the stock

Home First was one of the earliest adopters of the cloud-based SalesForce platform. The company applies its robust technology infrastructure across its business functions - aggregator app for efficient sourcing of leads, RM app for entering all details with respect to potential opportunities into the system, an integrated customer CRM and LMS on a cloud-based platform and a dedicated portal for legal and technical vendors.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.