Neutral Can Fin Homes; target of Rs 890: Motilal Oswal

Motilal Oswal recommended Neutral rating on Can Fin Homes with a target price of Rs 890 in its research report dated July 22, 2024.

Broker Research

July 23, 2024 / 13:12 IST

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Motilal Oswal's research report on Can Fin Homes

Can Fin Homes (CANF)’s 1QFY25 PAT grew ~9% YoY to ~INR2b (7% miss). NII rose 13% YoY to ~INR3.2b (in line), while other income stood at ~INR70m. Opex rose ~12% YoY to INR488m (12% below MOFSLe). The cost-to-income ratio came in at ~15% (PQ: 21%, PY: 15%). RoA/RoE stood at ~2.2%/~17.6%. Management retained its loan growth guidance of ~15% in FY25, and is confident of achieving disbursements of ~INR105b in FY25. This will be aided by: 1) branch expansions and resultant improvements in productivity, b) enhanced organizational structure with zonal offices, c) investments in improving its APF tie-ups with developers, and d) investments in sales teams and digital marketing.

Outlook

CANF has successfully demonstrated its ability to maintain its pristine asset quality for several years, and we expect the same to continue. However, CANF will have to accelerate its disbursements in the next few quarters to deliver on its guided loan growth. We estimate a CAGR of 11%/10%/14% in NII/PPOP/PAT over FY24-26, with an RoA of 2.2% and an RoE of ~17% in FY26.Reiterate Neutral with a TP of INR890 (premised on 2.0x FY26E P/BV).

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