Buy Can Fin Homes; target of Rs 1550: Motilal Oswal
Motilal Oswal is bullish on Can Fin Homes has recommended buy rating on the stock with a target price of Rs 1550 in its research report dated May 04, 2016.
Motilal Oswal's research report on Can Fin Homes
Can Fin's Net Income at INR98.6cr grew by 66% YoY on the back of 29% growth in loan book and 70bp expansion in NIMs to 3.24% on a YoY basis. NIMs expaned 7bp QoQ. Further, lower OPEX led to a strong growth in Pre Provisioning Profits at INR93.5cr, an increase of 105% YoY. Provisions increased from INR6.3cr in 4QFY15 to INR14cr in 4QFY16. Consequently profits grew by 107% at INR47.4cr against our estimate of INR40.6cr, a beat of 17%.
We expect Can Fin to deliver PAT CAGR of 30% over FY16-18E with an improvement in ROE from 18.9% in FY16 to 22.7% in FY18E. With the new reduced risk weightages, we believe Can Fin will be able to generate 20%+ ROE on a sustained basis from FY17E onwards, which would lead to a re-rating in the stock and thus we raise our target multiple for Can Fin for FY18 from 3.0x to 3.2x (a 10% discount to peers due to comparatively lower ROE) and arrive at a target of INR1,550 (earlier INR1,300). On P/E basis, Can Fin is trading at 17x FY17E and 13x FY18E EPS.
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