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Repco Home Finance - Self employed and LAP segment continue to drive growth

August 14, 2015 by shekarm

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RHFL’s loan book grew a healthy (29.7%YoY, 5.5%QoQ), supported by growth in sanctions (37.5%YoY) and disbursements (39.9%YoY).

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Traction in loan book growth was led by non-salaried segment (+65.6%YoY). Salaried segment witnessed growth at 0.6%YoY. Consequently, their share in overall portfolio stood at 57% and 43% respectively.

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RHFL’s, LAP segment grew (28.3%YoY), while individual loans showed a growth of 30%YoY. Subsequently, the share of LAP and individual segment was noted at 19% and 81% respectively.

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The management indicated to grow LAP share to ~20% in the medium term and guided for a loan book and profitability growth of 25%+  by penetrating deeper into the Tier I and Tier II cities.

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Management highlighted demand for loans continues to be robust in the states of Gujarat and Maharastra, while slackness was witnessed in Tamil Nadu.

Valuation: At CMP, the stock trades at 4.2X FY17E P/BV and 23.7X P/E FY17E, Given, niche presence, high return ratios, traction in business growth, steady NIMs, and stable cost ratios we maintain OUTPERFORMER rating and revise the target price upwards to INR 810, implying a PBV of 4.6x FY17E.

 

Risks: Slowdown in real estate sector, increase in slippages and regulatory changes might have an adverse impact on profitability.

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