HDFC Securities has upgraded Home First Finance Company India Ltd.'s rating from Reduce to Add, with a revised target price of ₹1,250. According to the brokerage, this target price implies 2.3 times Sep-28 adjusted book-value-per-share and 15x Sep-28 EPS. The upgrade reflects improved growth visibility and favorable risk-reward dynamics in current market conditions.
As reported by HDFC Securities, Home First Finance Company is positioned to deliver approximately 25% assets under management compound annual growth rate over FY27-FY29E. The company's loan growth has decelerated significantly from ~35% to ~25% YoY, which has driven valuation de-rating. However, disbursements growth has witnessed an uptick, which is likely to sustain driven by the company's initiatives and improving demand conditions. The brokerage notes that this growth trajectory is supported by increased investments in distribution post peaking of volume productivity metrics, gradually improving demand, and geographical diversification.
With 84% of AUM as home loans, Home First Finance Company has significant headroom for product diversification, according to the brokerage. The company currently has co-lending operations at sub-5% of disbursements, which provides substantial opportunity to expand the addressable market. This diversification strategy is expected to support the company's growth trajectory and reduce concentration risk in the home loan segment.
As reported by HDFC Securities, profitability has largely remained intact, with compression in RoE due to capital raise. The brokerage notes that operating efficiency is likely to remain steady at current levels, with limited room for improvement going ahead. However, RoE is likely to improve with increasing leverage, supporting the company's financial performance trajectory.
The brokerage highlights that valuation de-rating from 4.0 times to 2.3x one-year forward price/book-value provides favorable risk-reward dynamics. Improving visibility of growth amid steady profitability, combined with the company's strategic initiatives and improving demand conditions, supports the positive outlook for Home First Finance Company. Current valuations reflect the company's strong fundamentals and growth prospects in the financial services sector.
