Buy Can Fin Homes; target of Rs 700: Prabhudas Lilladher

Prabhudas Lilladher's research report on Can Fin Homes

Canfin reported a stable quarter as PAT at Rs1.5bn beat PLe by 6.5% driven by higher NII and lower provisions as AuM growth at ~20% YoY was in-line. Company expects disbursal momentum to improve in Q4 while it envisages a loan growth of 20% in FY24E. As asset quality risks are receding, share of self-employed is gradually rising and over the medium term, it could increase from 26% to 30%. Liability mix has improved with NCD/CP share touching 15%/9% (vs 7%/15% a year ago). While we remain watchful of NIM, overall NIM for FY24 could be higher vs FY23 as only 28% of assets are repriced to RBI rate hikes compared to 65-70% of liabilities. New MD&CEO is expected to join before FY23 end. We raise earnings for FY23/24E by 4%/2% led by better NII. Canfin’s structural story is intact with likely RoE of ~17.0% over FY23-25E, while valuation at 1.6x is attractive.

Outlook

We maintain multiple at 2.1x on Sep’24 ABV and keep TP unchanged at Rs700. Retain BUY.