Small-cap stock Repco Home Finance climbs 3% in a weak market; should you buy?

Small-cap stock Repco Home Finance witnessed a healthy gain of nearly 3 per cent in intraday trade on the BSE on Friday, June 13, defying weak market sentiment. Repco Home Finance share price opened at ₹412 against its previous close of ₹418.50 and rose 2.75 per cent to an intraday high of ₹430. On the other hand, equity benchmark Sensex crashed 1.6 per cent during the session.

Repco Home Finance share price trend

Repco Home Finance share price has seen healthy traction lately. The small-cap stock has gained nearly 9 per cent in June so far, after a 3 per cent fall in the previous month.

However, year-to-date, the stock is down over 2 per cent, while over the last year, it has lost over 21 per cent.

Repco Home Finance share price hit a 52-week low of ₹307.95 this year on March 3, while it hit a 52-week high of ₹594.70 on September 13 last year.

Should you buy Repco Home Finance shares?

Experts largely appear positive about the stock's long-term prospects due to its attractive valuation and improving asset quality.

Brokerage firm YES Securities has a buy call on the stock with a target price of ₹560 due to cheaper valuation and expectations of further improvement in asset quality.

"Repco trades at an undemanding valuation of 6 times P/E and 0.7 times P/BV on FY27 estimates, and acceleration of loan growth and further improvement in asset quality should re-rate the stock. We have a buy rating with a 12-month target price of ₹560," YES Securities said.

Analysts at YES Securities interacted with Repco Home Finance’s management to understand the drivers of loan growth acceleration, factors which will influence NIM, and actions taken to consistently reduce the overdue portfolio and NPLs.

The brokerage firm said Repco's management was quite confident about achieving the guided disbursements of ₹4,000 crore in the current year, reaching 12 per cent loan-book growth, managing spread decline within 15-20 bps, and improving the GNPL ratio to 2.5 per cent by the year-end.

YES Securities highlighted that Repco has demonstrated a substantial improvement in GNPL level over the past three years without any meaningful write-offs.

"Due to strengthened underwriting (income/cash-flow being assessed through business visits), the credit quality of the portfolio disbursed from Apr’22 has been strong with low GNPLs and overdue," the brokerage firm said.

"Repco carries a substantial PCR of 60 per cent on its NPLs, whereas the lifetime principal write-offs have been minuscule," it said.

Is it the right time to buy Repco Home shares?

While the stock appears to be an attractive long-term buy, some technical experts believe one should wait for a healthy pullback before buying this stock.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that Repco Home has been trading in a range of approximately ₹380 to ₹435.

He underscored that a notable triple top formation has emerged near the ₹440 level, indicating strong resistance. This pattern, combined with a bearish divergence on the technical charts, suggests a potential reversal or weakness ahead.

"Given these signals, we recommend booking profits in the ₹430–420 zone to lock in gains. It would be prudent to wait for a healthy pullback before considering any fresh entry, as current levels may not offer a favourable risk-reward setup in the short term," said Patel.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.