Buy Midcap Housing Finance Stock With Rs. 610 Target Price, Healthy Loan Growth: Motilal Oswal

Top brokerage firm Motilal Oswal gives a buy rating to the stock of Can Fin Homes (CANF). The brokerage firm is expecting the healthy trajectory of loan growth and asset quality to sustain while margins remain a key monitorable.

Stock To Buy: Target Price

The Current Market Price (CMP) of Can Fin Homes (CANF) is around Rs. 525. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 610. This stock has the potential to give a 16% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 6,910 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 525
Target Price	Rs. 610
Potential Upside	16.00%
52-week high share price	Rs. 685
52-week low share price	Rs. 406.65

Financials

Can Fin Homes (CANF)'s 2QFY23 PAT grew 15% YoY but declined 13% QoQ to Rs. 1.4b (8% miss), led by higher-than-estimated credit costs. PPoP was largely stable QoQ and up 33% YoY to ~Rs. 2.2b (in-line). GNPA improved ~3bp sequentially to 0.62%, while NNPA increased ~5bp QoQ to 0.35% with PCR declining ~110bp QoQ to ~43%. Credit costs stood at Rs. 132m. Decline in PCR was driven by transition to ECL-based provisioning norms. Bank borrowings increased to 54% (from 50% a year ago), while the share of CPs declined sequentially ~300bp to 8%.

Stock Upside

Reiterating the buy rating, Motilal Oswal said, "We model an AUM/disbursement CAGR of 17%/10% over FY22-24. Given that we do not expect any new negative developments in asset quality, we now estimate FY23 credit costs of ~16bp (v/s ~20bp earlier). Valuations can get re-rated to 2.0x P/BV, if the new (to-be appointed) management team gains the investor confidence that CANF can continue delivering the same strong loan growth and pristine asset quality as it has been exhibiting under the leadership of the outgoing CEO."

Stock valuation

The brokerage firm mentioned, "CANF is a franchise with moats on the liability side and strong asset quality. Its ability to maintain stable margins is a key monitorable as CANF continues on its healthy loan growth trajectory. The next leg of the re-rating in valuation multiple will be contingent on the appointment of the new management team and its ability to inspire investor confidence in loan growth and asset quality. We reiterate our Buy rating with a target price of Rs. 610 (premised on 1.9x FY24E BVPS)"

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.