HDFC Securities has upgraded Home First Finance Company to 'Add' with a target price of Rs 1,250, citing attractive valuations after a recent correction. The brokerage expects the lender to maintain a 25% annual growth rate in assets through FY29, driven by expanded distribution and new market entries.
HDFC Securities has revised its outlook on Home First Finance Company, upgrading the stock to 'Add' from its previous 'Reduce' rating. The brokerage established a target price of Rs 1,250, citing a more favorable balance between the company's current valuation and its projected growth trajectory.
The stock has undergone a significant valuation adjustment, with its price-to-book multiple falling from 4.0 times to 2.3 times one-year forward estimates. This shift suggests that the earlier premium has largely been corrected, leading the brokerage to identify a more stable risk-reward profile for the company. HDFC Securities projects a 25% compound annual growth rate in assets under management (AUM) from FY27 through FY29.
To achieve this growth, the lender is focusing on expanding its distribution channels and entering new geographical markets. Currently, home loans account for approximately 84% of the company’s total assets, and management appears to be working on diversifying this product suite. While year-on-year loan growth recently decelerated from 35% to 25%, disbursement trends are showing signs of stabilization, which supports the brokerage's long-term outlook.
Investors should also be aware of several business risks that could impact performance. The company faces potential pressure on its net interest margins due to rising incremental borrowing costs. Furthermore, the lender is currently navigating a leadership transition following the departure of its Chief Financial Officer on August 31, 2026. While the company recently raised capital—which caused a temporary compression in Return on Equity—the brokerage expects these returns to improve as the firm utilizes its leverage more effectively.
For investors, the most important monitorables in the coming quarters will be the company’s ability to sustain its 25% AUM growth guidance and keep long-term spreads within the 5.0% to 5.25% range. Whether the management can effectively execute these expansion plans while keeping borrowing costs stable will be crucial for the company's financial health.