Buy CAN FIN Homes Limited For Target Rs. 650 - Yes Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Our view ‐ Growth delivery is key for re‐rating; retain BUY
Can Fin Q1 FY22’s PAT was 5% lower than our estimate; however, it stood higher 6% qoq and 17% yoy. The earnings miss came from a weak NII performance (also 5% below our expectation), due to a sharp 40bps qoq decline in NIM. The margin was impacted by large quantum of back‐book re‐pricing from anniversary resets. About 70% of the loan portfolio is repriced versus 22% till March. Having raised rates by 50‐60bps in Q1 FY22, bulk of remaining asset re‐pricing could happen at similar or a higher rate. As funding environment remains benign, Can Fin believes that its Spread/NIM (2.4%/3.3%) has troughed out and would improve in ensuing quarters.
The management expects to execute much higher business volumes from current quarter onwards, even with higher rates, on account of strong demand recovery. With differential pricing over market likely to be maintained at 70‐80 bps, BT Out could increase (though not to the levels seen during H1 FY21). On asset quality, company’s estimate of 1.5‐2% restructuring could deject the street. After earmarking for likely restructuring, the additional provisions decline to Rs330mn (15 bps of loan assets). While it would ensure lower credit cost in remaining quarters, a write‐back may not be likely.
We see a combination of 12‐14% growth, 3.2‐3.4% NIM and 1.8‐2% RoA plausible for Can Fin over FY21‐24. Q1 FY22 performance and earnings commentary cause marginal cut in our earnings estimates. Surpassing our growth expectation could trigger a re‐rating in the stock which is currently trading at 2x FY23 P/ABV for estimated BV compounding of 15‐16% pa. Downside support to current valuation exists from a robust balance sheet ‐ zero construction finance exposure, granular retail home loan and LAP portfolios, high proportion of prime Salaried customers, a healthy contingency provisioning buffer and strong Tier‐1 capital of 24% (DER 7.4x).
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632
Above views are of the author and not of the website kindly read disclaimer
