Broker’s call: Can Fin Homes (Buy)
Jefferies
Can Fin Homes Ltd, backed by Canara Bank, is a prominent housing finance company catering to low- and middle-income borrowers. Nearly 76% of its loans go to salaried individuals, and it operates in 21 states, primarily in Tamil Nadu, Andhra Pradesh, and Karnataka. It's noteworthy as the first housing finance firm promoted by a nationalized bank and one of only a few allowed to accept public deposits.
The September quarter's profit after tax (PAT) rose by 9% year-on-year to ₹275 crore, slightly exceeding analysts' expectations of 3% growth. However, assets under growth fell to 11% from the previous quarter's 11%, due to a 7% decline in disbursements, impacted by disruptions from technology implementation. The non-interest income (NIM) dipped by 3 basis points quarter-on-quarter, while exit spreads decreased by the same amount.
Interest costs dropped by 5 basis points quarter-on-quarter to 7%. The firm's current price target of ₹1,075 is based on a price-to-book value ratio of 1.7x for the September quarter of this year. Potential downside risks include slower loan growth, a sharper decline in NIMs due to falling home loan rates, and a deterioration in asset quality.
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