YES Securities is bullish on Can Fin Homes has recommended buy rating on the stock with a target price of Rs 415 in its research report dated June 18, 2020.
YES Securities' research report on Can Fin Homes
Can Fin delivered a robust PPOP performance (up 6% qoq and 37% yoy) in Q4 FY20, led by material NIM expansion (at 3.52%, +12 bps qoq and +20 bps yoy), which in turn was driven by resilient portfolio yield and decline in the cost of funds. An overall Covid related provisions of Rs365mn constricted a significant jump in earnings. Management is not expecting significant growth in current fiscal with recovery in loan demand seen only from Q4 FY21. On NIMs, company is more sanguine on the outlook with expectations of persistent decline in funding cost in ensuing quarters and a calibrated decline in portfolio yield due to annual reset. About 30% of customers have taken moratorium. Here the customer mix is slightly skewed towards SENP segment. Management is confident about salaried customers who have taken moratorium to start paying from September. NPL flows are more expected from SENP segment, particularly from delinquent pool.
Upgrade rating to BUY from ADD. Can Fin remains the safest bet in HFC space due to its strong balance sheet construct (least risky among all HFCs), robust liquidity position (see lenders offering funding at even finer rates) and thus better growth prospects when demand recovers (also supported by lower base and strong distribution in Tier 2-4 markets). The traction in NIM could continue and will offset the likely spike in credit cost cushioning return ratios. Estimate avg. RoA/RoE at 1.8%/16.5% without considering equity raise. Stock trades at 1.6x P/ABV and 10x P/E on FY22 basis.
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