Add Can Fin Homes Ltd for the Target Rs 875 by Emkay Global Financial Services Ltd
Can Fin Homes reported a muted quarter in terms of business volumes, primarily due to temporary disruptions from the enterprise-wide rollout of core IT systems (Project Tejas), which impacted 2Q disbursements by ~Rs3.6bn. 2QFY27 disbursements stood at Rs23.7bn (down 9% qoq/7% yoy), while AUM grew ~10% yoy to Rs435.4bn. Despite the disbursement shortfall, the management maintained its FY27 disbursement guidance of Rs130bn (+20% yoy; ~13–14% AUM growth), supported by the redeployment of ~129 staff back to branch operations post-rollout, direct sales team expansion (to 120 by Dec26), full operationalization of 25 new branches, and some moderation in prepayments due to the repo rate hike. The management also provided an initial FY28 disbursement outlook of Rs160bn (+20% yoy, ~15%+ AUM growth). Margins (NIMs) are expected to hold at 3.75–3.80%, led by the company’s ability to pass on the rate hike to customers, with ~10bps already passed on in Oct-26 and further hikes depending on the RBI’s rate decision. Asset quality remains pristine, with GNPA at 0.9% and credit costs guided at ~10bps. With tech headwinds behind, moderating run-offs, and an accelerating 2H trajectory, we maintain ADD with an unchanged Sep-27E TP of Rs875 (1.4x FY28E PBV).
Softer disbursements, stable fundamentals
Can Fin posted a softer 2QFY27, with disbursements down 7% yoy (Rs23.7bn) and AUM growth of ~10% yoy to Rs435bn, mainly due to the rollout of Project Tejas across branches, resulting in Rs3.6bn impact on disbursements. PAT for the quarter came in at Rs2.75bn, whereas reported NIM expanded qoq to 3.88%, largely driven by portfolio reset; COF was broadly stable at 7.01%. Cost-to-income stood at 19.5%, while credit cost was contained at ~7bps. Asset quality was stable, with GNPA/NNPS at 0.9%/0.4%
Reaffirms guidance delivery
The management remains confident of achieving its ~14% AUM growth target in FY27 (backed by unchanged Rs130bn disbursement guidance), as IT-migration disruptions are behind it and narrowing pricing gap vs commercial banks should moderate elevated prepayment rates. The management indicated that it is targeting NIMs of 3.75–3.80% and spreads of +2.75%, smoothly navigating the rising rate cycle, with a 10bps rate hike already passed on to customers to largely mitigate the ~12–13bps blended COF impact from the recent 25bps repo hike. The management also stated that it is progressing well on its distribution scale-up, with 25 new branches fully operational and the direct sales team expanding to 150 by FY27-end, which will collectively drive the 2H volume catchup. Overall, asset quality remains pristine, with GNPA at 0.90%, and credit costs are likely to be contained at ~10bps, while the company targets a robust FY28 disbursement outlook of Rs160bn to drive next leg of ~+15% AUM compounding.
Marginally adjust estimates; maintain ADD
Strong 2H disbursement rebound should drive AUM growth toward 13–14%, while stable margins and pristine asset quality (~10bps credit costs) sustain robust return ratios (ROA ~2.3%, ROE ~17%). Factoring in 2Q performance and FY27 outlook, we slightly adjust our estimates and retain ADD with an unchanged Sep-27E TP of Rs875 (1.4x FY28E PBV).
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
