Dealer’s name: Repco Dwelling Fin (Purchase)

Goal: ₹350

CMP: ₹212.55

Repco delivered a superb quarter with earnings beat of 10 per cent encompassing the affect of some structural adjustments and a small compression in NIM. The important thing optimistic spotlight of firm’s efficiency was sustained enchancment in asset high quality in a normally tender quarter, which drove not solely negligible credit score value but in addition NPL protection enchancment.

The roll-out of latest mortgage origination system throughout branches in December impacted disbursements for the quarter (which notably nonetheless was moderately wholesome in pre-Covid context).

With mortgage portfolio on semi-annual reset and huge borrowings linked to MCLR, the portfolio unfold/NIM compressed 10 bps q-o-q to three.3 per cent/4.8 per cent. The non-employee opex was greater on account of non-recurring charge funds for consultancy on tech and strategic adjustments.

Repco’s valuation ought to monitor bettering asset high quality and progress traits in the long term. Whereas the corporate’s supply on asset high quality has been comforting, a secular enchancment in mortgage ebook progress is keenly awaited. We anticipate 12 per cent mortgage CAGR over FY23-25 with common RoA/RoE supply of two.4 per cent/12 per cent.

Progress past 15 per cent and enhance in dividend pay out can elevate RoE, given excessive tier-1 capital.