This Small Cap Home Finance Firm Gets Buy Call For 50% Gains, Shares Surged 26% In Past 1 Month

Stock Outlook

Can Fin Homes' stock last week on Friday closed at Rs 537.65 apiece after delivering a major gain of 7.92 in the week. Today, 25 July, it opened at Rs 536 apiece, currently trading at Rs 545.40 apiece, 1.44% above its previous close. The stock's 52-week low was recorded on 20 June 2022 at Rs 406.65 apiece and the 52-week high was recorded on 18 October 2021 at Rs 722 apiece, respectively. 
 
It is a small cap Home Finance Company with a market capitalization of Rs 7,228.94 crore. The ROE of the stock is 15.36%. TTM EPS is Rs 39.39. PE ratio is 13.84. PB ratio is 2.37. Its face value is Rs 2. The dividend yield is 0.55%. 
 
As mentioned above, it has given 7.92% in the last week, and in the last 1 month, its share price surged 25.74%. In the past 1 year, the share price surged a little 2.51% and in 3 years, it surged 42.08%, respectively. In the last 5 years, it has given a negative return of 11.62%.
 

 

AUM growth remains robust in a seasonally weak quarter, aided by lower repayments

AUM grew 24% YoY and 3% QoQ to INR27,538cr. Disbursements stood at INR1,722cr, up 93% YoY, aided by a low base of Q1FY22, but de-grew 32% QoQ. Lower disbursement growth was offset by a lower calculated repayment rate of 13.4% (annualised). AUM growth was seen across the board, with housing loans AUM increasing 23% YoY. Top-up loans and mortgage loans / flexi LAP saw even stronger momentum, growing 38% and 40% YoY, respectively. The management expects the loan book to grow at 18% for FY23.
 

Highest-ever quarterly PAT driven by provision reversal and yield expansion

NR rose 5% QoQ to Rs 255 cr, driven by the widening of spreads by ~11 bps QoQ to 2.7%. Spread improvement was mainly led by the repricing of yields, resulting in yield expansion of 35 bps QoQ to 8.5%. Yield expansion was higher than the increase in reported cost of funds to 5.8%. NIM shrank 55 bps QoQ to 3.6%, mainly because of LCR investments and insurance income, which pushed NIMs higher by a similar amount in Q4FY22. Higher NR and opex decline of 5% QoQ resulted in the C/I ratio decreasing 400 bps QoQ to 15.8%. Overall, both these factors led to 10% QoQ increase in PPoP to INR215cr. The management expects the C/I ratio to settle at 18- 19% in the medium term. Provisions saw a reversal of Rs 4 cr, resulting in the highest-ever quarterly PAT of Rs 162 cr (up 32% QoQ).
 

Asset quality remains steady sequentially; audit overhang lifted with minimal impact

GNPA and NNPA were largely stable on a sequential basis at 0.65% and 0.30%, respectively. PCR came in at 53.8% (vs 53.1% in Q4FY22). After the Canara Bank audit due to the whistle-blower complaint, all the branches were audited by an internal audit team and multiple external audit firms. This resulted in the detection of additional irregularities of  Rs 2.43 cr, which have been fully provided. Out of the restructured assets, the management anticipates only 5% to slip into NPA from 7% earlier.
 

Buy for a target price of Rs 800 apiece

With the audit overhang now lifted, we expect the company to slowly re-rate back to its earlier premium multiples, given its growth and asset quality trajectory. "We expect AUM to expand at a CAGR of ~19% over FY22-24E, and RoA and RoE to close in at 1.9% and 17.2% by the end of FY24. Thus, we maintain our 'BUY' recommendation with a target price of Rs 800," the brokerage said. 

About - Can Fin Homes Ltd.

Can Fin Homes Ltd, a Housing Finance Company promoted by Canara Bank, in 1987, the International Year of Shelter for the Homeless. Can Fin Homes Limited (CFHL) is a key player engaged in the business of housing finance in India. The Company is incorporated under the Companies Act, 1956. The first HFC floated by any Nationalised Bank in the country; Founder Chairman Shri B Ratnakar. The Company offers a range of products on housing such as loans for home purchase home construction home improvement/extension site purchase as well as non-housing finance. It has a pan-India presence with 154 branches 21 Affordable Housing Loan Centres & 14 Satellite Offices spread across 21 states and union territories.