Repco Home Finance - Q2 FY21 Result Update - Strong Show - YES Securities

- PAT Rs80cr v/s expectation of 65cr - two reasons 1) PPOP 115cr v/s estimated 107cr and 2) lower provisions of 7cr v/s estimated 20cr

- PPOP beat driven by strong 9% qoq growth in NII - drivers were risk-based pricing changes + higher penal interest income + softening of funding cost

- Pricing changes have been made in both directions - Repco now has starting HL rate of 7.9% (usual 100 bps above market) for CIBIL of 750+ - pricing corrected upwards for certain perceived stressed segments

- Funding availability being comfortable and its declining cost will protect NIM from coming-off at least in the current fiscal - company substituting higher-costing liabilities with lower-costing ones

- Q2 disbursements at 65% of pre-Covid run-rate - Q3 expected to be better - BT IN generally has been a negligible portion

- BT out run-rate near 60-70cr per month - SBI has traditionally been the largest acquirer - but generally for loans >50 lacs - BT Out for loans <25 lacs minimal as DSAs/Banks target larger tickets

- Collection Efficiency of 93% in Sept. is pure collections against month's billing - does not include arrears, prepayments or foreclosures - 93% collection represents more than 93% customers paying (87-88% is full EMI collection)

- Non-paying customers have come down from 1065cr on Aug 31 to 760cr on Sept 30 and below 700cr at Oct end (current loan book 12000cr) - however, this includes 480cr of NPLs also - so only residual 220-250cr (2% of loan book) is potential restructuring pool

- Stage-2 is around 2.5% of loan book - including 2-3cr SC related potential slippages - Stage-3 at 4% with ECL of 41% - ECL on Stage 1 & 2 is 40 bps

- Collection efficiency has marginally improved in Oct and expected to reach 95% by Dec (pre-Covid was 96-97%) - Confidence on collections improving coming from data on borrower income trends

- Repco expect provisioning run-rate to be around 10cr in coming two quarters and quarterly PAT to be maintained at 75-80cr with disbursements improving

- Provisional Tier-1 ratio at 27%

- Despite sharp price recovery, Valuation still inexpensive at 0.8x current P/BV

Shares of REPCO HOME FINANCE LTD. was last trading in BSE at Rs.245.15 as compared to the previous close of Rs. 233.95. The total number of shares traded during the day was 46184 in over 2160 trades.

The stock hit an intraday high of Rs. 249.55 and intraday low of 236.25. The net turnover during the day was Rs. 11256643.

Source : Equity Bulls

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