Accumulate Can Fin Homes; target of Rs 767: Geojit Financial Services

Geojit Financial Services research report on Can Fin Homes

The loan book grew by 9% YoY to Rs.37,155cr. The client base now stands at 2.73 lakh. Disbursements slowed to Rs.1,879cr, a decline of 21% QoQ, attributed to weak disbursements in the Karnataka following the introduction of e-khata. Net Interest Income grew by 4.8% YoY to Rs. 345cr. The Net Interest Margin (NIM) stayed flat at 3.73%. The cost-to-income ratio improved to 16.92%, but it is expected to increase due to reforms in IT transformations. PAT grew marginally by 6% YoY to Rs. 212cr due to a 61% QoQ increase in provisions, attributed to a slight deterioration in asset quality. Asset quality experienced slight deterioration, with GNPA/NNPA at 0.92%/0.50% compared to 0.88%/0.47% in Q2FY25. The Provision Coverage Ratio (PCR) on stage 3 assets decreased to 45% from 47% sequentially.

Outlook

Although management has reduced its FY25 guidance on disbursements and AUM, they have maintained their guidance for FY26. We expect the ROA/ROE to remain largely stable at 2.2% for FY26-27. Therefore, we reiterate our Accumulate rating with a revised target price of Rs. 767, based on 1.5x FY27E BVPS.