YES Securities' research report on CAN FIN Homes
Can Fin’s core earnings performance, adjusted for Ambala fraud write-off (Rs400mn) and management overlay provisions (Rs170mn), was better than expectations even with elevated NPA provisions (Rs160mn v/s Rs50mn in Q1) manifested in solid RoA/RoE delivery of 2.2%/18.8%. The core earnings beat came from a stronger-thananticipated NIM performance (improved from 3.48% to 3.63%) even as loan growth was in-line (2.6% qoq/15.7% yoy). Credit cost was higher with significant slippages (more than management guidance) from the restructured pool where billing had resumed by June, which also drove a GNPL increase of 24% qoq (level rising to 76 bps). Additional management overlay provisions were made to cushion future P&L against anticipated slippages from restructured pool (~Rs2.3bn) coming out of moratorium after July. Loan disbursements in Q2 FY24 were modest (in-line with management indications), being impacted by strengthening of processes/systems (additional layers of controls). The significant expansion in Spread/Margin was solely driven by improvement in portfolio yield which was caused by the lagged repricing benefits.
Outlook
Can Fin would likely raise equity capital when it sees growth sustaining above 18% (prefers to cap balance sheet gearing at 8x). Our PAT and ABV estimates have undergone mild upgrades. Upgrade rating to BUY and 12m PT to Rs 916.
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