Buy Can Fin Homes; target of Rs 900: Geojit Financial Services

Geojit Financial Services research report on Can Fin Homes

Can Fin Homes Ltd. (CANF) is the housing finance arm of Canara Bank. Predominantly active in South India, the company offers a wide range of financial products, including housing loans, composite loans, non-housing loans, mortgage loans, and commercial property loans, in addition to fixed and cumulative deposits. The loan book grew by 9.0% YoY to Rs. 38,773 cr. The client base now stands at 2.83 lakh. Net interest income grew by 12.9% YoY to Rs. 349 cr. The net interest margin (NIM) edged moderately lower to 3.6% compared to last quarter. The cost-to-income ratio in Q1FY26 inched up mainly due to a one-time actuarial impact from salary revisions and increased rent from new branches and zonal offices. It is expected to normalize to around 18% in FY26 and 19% in FY27 with IT costs factored in. PAT grew modestly by 12.1% YoY to Rs. 224 cr in Q1FY26, despite an uptick in provisions. The increase in provisioning was a deliberate and tactical move by the management, aimed at cleaning up sticky accounts early in the fiscal year. Asset quality experienced slight deterioration, with GNPA/NNPA rising to 0.98%/0.54% from 0.91%/0.49% in Q1FY25. The Provision Coverage Ratio (PCR) also declined to 45.2% from 46.5% in Q1FY25.

Outlook

As the benefit of the rate cut is transmitted only after it has been experienced by the bank, the NIM is expected to remain stable. The bank has guided for a credit cost of 15 bps for FY26, anticipating that asset quality will remain within a stable range. ROA and ROE are projected to remain largely stable at 2.1% and 16.6%, respectively, over FY26– 27. Therefore, we assign a BUY rating with a revised target price of Rs. 900, based on 1.8x FY27E BVPS.

For all recommendations report, click here