Looking for multibagger? ICICI Securities sees over 140% upside in this stock

Shares of Repco Home Finance Limited have not been able to deliver good returns to its investors till now. However, the brokerage house ICICI Securities believes that the change in management could be a positive trigger for the company.
 
According to a recent report by ICICI Securities, the company’s business franchise is currently undervalued and the stock trades below FY23E book and 5x earnings and is available at less than 0.2x AUM.
 
The brokerage house has a revised target price of Rs 563 per share. Earlier, the target price was Rs 650. So, if you compare it with the current market price which is Rs 233, the stock has a whooping upside potential of over 140 per cent.
 
What's the rationale?
 
"Change in management was key," noted ICICI Securities. Repco’s new CEO is likely to join from April 2022. Growth strategy and business initiatives are to be watched out closely as those would set the stage for earnings momentum, it added.
 
However, the brokerage house said that Repco Home Finance has disappointed on most operating metrics in Q3FY22. Not only did excess provisioning of Rs 700 million on incremental GNPAs (as per revised asset classification norms) led to elevated credit cost of more than 250bps, but also lagged growth. NIM compression and elevated opex dragged earnings.
 
Post the revised asset classification norms, GNPAs spiked to 7 per cent vs reported stage - 3 of 4.6 per cent (4.3 per cent in Q2FY22). It carries ECL provisioning of 3.5 per cent on a stress pool of more than 10 per cent. Also, the growth momentum lagged peers considerably.
 
ICICI Securities mentioned fundamentally weak performance and behaviour of the restructured portfolio as the key risks for the company.
 
Change in Directors and Key Managerial Personnel
 
Recently, the company announced the appointment of K Swaminathan as Additional Director in the capacity Managing Director and Chief Executive Officer for 3 years with effect from March 01, 2022, or from the date of joining whichever is earlier, subject to the approval of the shareholders.
 
The date of joining of K Swaminathan will be intimated subsequently, the company said in a regulatory filing.
 
It also announced the appointment of K Lakshmi as Chief Financial Officer and Key Managerial Personnel of the company.
 
About the company
 
The Chennai-headquartered Repco Home Finance Limited is present in two segments – individual home loans and loans against property (LAP). It provides tailor-made home loan products to individual borrowers in both salaried and non-salaried (self-employed professional and self-employed non-professional) segments.
 
As of December 31, 2021, the company had a total network of 155 branches and 22 satellite centers spread across Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Kerala, Maharashtra, Odisha, Gujarat, West Bengal, Madhya Pradesh, Jharkhand, Rajasthan and the Union Territory of Puducherry.