Buy Home First Finance Company; target of Rs 1450: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Disbursement growth: Home First Finance's disbursements rose 32% YoY to INR 17bn in Q2FY27, driven by stability in teams across states and lower attrition, with demand remaining good across the board.
  • Asset quality resilience: The company's asset quality remained stable, with Gross Stage-3 improving 10bps QoQ to 1.7% in Q2FY27, and management attributing this to slower incremental delinquency flows amid a stable macro environment.
  • Operating efficiency: Home First's cost-income ratio improved to 30.8% in Q2FY27, with a steady decline in the cost-income ratio, and management expecting another 10bps reduction in FY28.
  • Spread resilience: The company's spreads moderated 10bps QoQ to 5.2% in Q2FY27, but management remains committed to a 5-5.25% spread on its fully floating-rate book.

Thesis Validation Checklist

  • AUM growth: Monitor if AUM growth sustains at 25% YoY, driven by disbursement growth and stable asset quality.
  • Asset quality: Watch for any signs of deterioration in asset quality, particularly in the LAP segment.
  • Spread stability: Track if spreads remain stable, despite potential increases in borrowing costs.
  • Operating efficiency: Monitor the company's ability to maintain its cost-income ratio, and achieve its target of a 10bps annual reduction in opex to assets.