Prabhudas Lilladher has initiated coverage on Home First Finance Company India with a 'BUY' rating and target price of ₹1,375 at 2.6x FY28E P/ABV. According to the research report dated February 23, 2026, the broker expects the company to maintain its robust growth trajectory with AUM growth of 24% CAGR over FY25-28E. The recommendation comes as the stock has seen significant correction and is trading below -1 standard deviation. The analyst initiation paints a bullish picture for Home First Finance Company India (HOMEFIRS), underpinned by projected 24% compound annual growth rate in Assets Under Management (AUM) through FY28E.
As reported by Prabhudas Lilladher, Home First Finance Company has demonstrated robust AUM growth of 29% CAGR over FY20-25. The broker expects this growth momentum to continue, supported by deeper geographic expansion in existing and new markets. The company's technology-driven model, including data analytics for underwriting and a connector model that sources nearly 77% of leads, is expected to underpin the scalability of the business model. The firm's ability to maintain steady yields and expected spreads between 5.0%-5.2% is a key factor supporting the 'BUY' recommendation. Management guidance indicates a continued focus on achieving 25% AUM growth in FY27, driven by expansion in distribution networks and leveraging technology.
According to the broker's analysis, while credit cost has been elevated at 40 basis points in Q3FY26 due to challenges in the MFI/MSME segment, it expects credit costs to normalize in FY27/FY28E. The company's Net Profit After Tax (PAT) for Q3FY26 rose 44% year-on-year to ₹140.2 crore, with AUM growing 24.9% YoY to ₹14,925 crore. The Return on Assets (RoA) stood at 4.0% in Q3FY26, a notable increase from 3.4% in the prior year's quarter. However, the Return on Equity (RoE) was impacted by the enlarged equity base post-QIP, standing at 13.7%, though a pre-money adjusted RoE of 17.1% indicates effective capital utilization prior to the raise. The company is projected to achieve RoE of 14% by FY28E with RoA of 3.5%, representing an earnings CAGR of 24% over FY25-28E.
Prabhudas Lilladher's valuation at 2.6x FY28E P/ABV accounts for a 20% discount from 5-year average of 3.3x. The broker notes that Home First Finance Company's unique technology-focused model, lean operations and strong execution capability justify a premium valuation versus peers, with FY28E P/ABV of 2.3x versus 1.6x for AAVAS. However, the company's P/E ratio of approximately 24.7x is still higher than many established housing finance peers like AAVAS Financiers (P/E ~16-21x) and Can Fin Homes (P/E ~13.76x). While HOMEFIRS's current P/E of 24.7x is considered expensive relative to its Indian Diversified Financial industry average of 21.7x, it is viewed as fairly valued when considering its growth prospects with a PEG ratio around 1.82. The company recently raised ₹12.5 billion via a Qualified Institutional Placement (QIP) in April 2025, bolstering its capital adequacy to a robust 48.6% Tier 1 ratio and providing a liquidity buffer of ₹4,357 crore as of September 2025.
