Can Fin's Net Income at INR 119cr grew by 30% YoY on the back of 28% growth in loan book and 32bp expansion in NIMs to 3.5% on a YoY basis. NIMs expanded 5bp QoQ. Growth in loans sanctioned (YoY) dipped slightly from 37% in 1HFY17 to 24% in the current quarter owing to demonetisation; however we believe it will bounce back to closer to 30% levels over the next couple of quarters as over 3/4th of the loan book comprises of salaried borrowers who would not be impacted by demonetisation in any way.
We expect Can Fin to deliver PAT CAGR of 37% over FY16-19E with an improvement in ROE from 19% in FY16 to 26% in FY19E. With the new reduced risk weightages (since 2015), we believe Can Fin will be able to generate 22%+ ROE on a sustained basis from FY17E onwards. We maintain our BUY rating on the stock. We value the stock at 4.0x Sep 2018 BV (at par with industry average) and maintain our target price at INR 2,260.
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