HDFC Securities presents Company Update: BUY Honasa Consumer, Home First Finance and redusce SBI CARD

MUMBAI, 9 OCTOBER:

1. SBI Cards and Payment Services: Improving asset quality, growth remains a concern. Maintain REDUCE

SBI Cards and Payment Services (SBICARD) has gradually improved its pace of card acquisitions in FY27, driving uptick in CIF growth (+7.6% YoY) in Aug-26. However, CIF market share has witnessed marginal moderation (18.5%) over July-Aug’26. Further, spends market share moderated during the same period, probably driven by moderation in corporate spends which had witnessed a strong uptick in H2FY26. Receivables growth remained muted for banks (+3.6% YoY in Aug-26), with a marginal uptick, and is likely to improve at a gradual pace for SBICARD as well (Q1FY27: 2.9% YoY). SBICARD’s asset quality woes seem largely behind with improving trends in forward-flow rates and write-offs and is likely to normalize during FY27E.

However, the steady state RoA/RoE is likely to be significantly below the pre-pandemic levels with sustained headwinds to revenue pools – lower share of revolve and deteriorating fee income unit economics. We revise FY27E/FY28E earnings estimates to factor in lower credit costs and uptick in CIF growth, offset by lower NIMs and higher opex and maintain REDUCE with a revised RI-based TP of INR 595 (implying 2.5x Sep-28 ABVPS, 16x Sep-28 EPS).

2. Honasa Consumer: Execution continues to outpace the FMCG pack. Maintain BUY

We reiterate BUY with a Sep‑27 TP of INR 550, based on 5x EV/sales (implying ~40x EV/EBITDA and ~49x P/E). In our recent management interaction, the team highlighted its execution strengths, with a clear focus on improving efficacy and leveraging category trends effectively. As captured in our update Offline execution aiding overall growth, Honasa continues to benefit from stronger offline traction. Compared to the broader FMCG universe, the company has sustained growth momentum by reading consumer trends well and scaling distribution thoughtfully.

While the long‑term ambition remains distribution expansion, the near‑term thrust is on driving higher throughput per outlet through sharper catalogue management. Management remains confident of sustaining inherent margins at 12-12.5% for FY27, with gradual expansion thereafter. We continue to model 18% revenue CAGR and 29% EBITDA CAGR over FY26–29E.

3. Home First Finance Company India: Improving growth visibility, upgrade to ADD

Home First Finance Company India (HOMEFIRST) is poised to deliver ~25% AUM CAGR over FY27-FY29E on the back of increased investments in distribution post peaking of volume productivity metrics, gradually improving demand, and geographical diversification. With ~84% of AUM as home loans, HOMEFIRST has significant headroom for product diversification, along with co-lending (currently sub-5% of disbursements) to expand the addressable market. Operating efficiency is likely to remain steady at current levels, with limited room for improvement, going ahead, while RoE is likely to improve with increasing leverage.

Valuation de-rating from 4.0x to 2.3x 1-yr forward P/BV, along with improving visibility of growth amidst steady profitability, provides favorable risk-reward. We upgrade HOMEFIRST from REDUCE to ADD, with RI-based TP of INR 1,250 (implying 2.3x Sep-28 ABVPS, 15x Sep-28 EPS).

(Disclaimer: The information provided here is investment advice only. Investing in the markets is subject to risks and please consult your advisor before investing)

(સ્પષ્ટતા: અત્રેથી આપવામાં આવતી તમામ પ્રકારની માહિતી કોઇપણ પ્રકારે રોકાણ/ ટ્રેડીંગ માટેની સલાહ નથી. બજારોમાં રોકાણ જોખમોને આધીન છે અને રોકાણ કરતા પહેલા કૃપા કરીને તમારા સલાહકારની સલાહ લો. વધુમાં અત્રે પ્રગટ થયેલા કોઇપણ સમાચાર કે વિગતો સાથે businessgujarat.in અંશતઃ કે સંપુર્સણપણે સહમત નથી.)