Update On Can Fin Homes Ltd By Yes Securities
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Can Fin Homes ‐ Q3 FY21 Results
* Marginal NII/NIM beat despite aggressive pricing corrections taken in Q3 ‐ NII came at Rs2.14bn v/s our expectation of Rs2.1bn
* Funding cost was 8% lower qoq suggesting seminal fall in cost of borrowing and sustained funding tailwinds
* Employee cost stood higher than even pre‐Covid levels (up 39% yoy) – probably manifesting the changes being done in branch operations and credit (we have picked this from ex‐employees)
* Negligible provisions indicative of lower‐than‐expected NPL flow and restructuring, and smaller increase in non‐NPL delinquent pool (30‐90 dpd)
* Co. continues to hold provision buffer (was not utilized during Q3) of Rs0.73bn, 35 bps of loan book
Initial impression (in the absence of PR and Presentation)
* Results are strong as expected. Marginal credit cost w/o dipping into Covid buffer is the key positive surprise. It further increases probability of some provisioning write‐back, as was indicated to us in a recent interaction.
* Disbursement and BT Out trends remain key monitorable, with bold pricing initiatives taken by management since October. Any hint of growth will drive valuation re‐rating from the current multiple of 2x FY23 P/ABV.
* Remain positive on Can Fin and expect stock performance to catch‐up on a likely stronger growth commentary from the Management
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