Company Update : Can Fin Homes Ltd By Motilal Oswal Financial Services Ltd
Disbursements weak; earnings in line
Minor deterioration in asset quality; NIM stable sequentially
* CANF’s PAT for 3QFY25 grew ~6% YoY to ~INR2.1b (in line). NII grew 5% YoY to ~INR3.4b (inline). Other income was ~INR58m (PQ: INR74m) because of lower disbursements in the quarter, translating into lower fee income.
* Opex grew ~20% YoY to INR593m (in line). The company’s cost-to-income ratio stood at ~16.9% (PQ: 17.1%, PY: 14.7%). Its 3QFY25 RoA/RoE was ~2.25%/~17.6%.
Disbursements weak due to the Karnataka E-Khata
* CANF’s 3QFY25 disbursements were flat YoY and declined 21% QoQ to INR18.8b. The impact was mainly on account of issues pertaining to registration in Karnataka following the introduction of E-Khata.
* Advances grew ~9% YoY to ~INR372b. Annualized run-off in advances stood at ~14% (PQ: 15% and PY: ~14%).
Margin broadly steady QoQ; borrowing mix stable
* NIM (reported) was broadly stable QoQ at ~3.73%. Reported spreads expanded ~10bp QoQ from both an improvement in yields and a decline in the CoB.
* There was no change in the borrowing mix during the quarter.
Minor deterioration in asset quality; GS3 rises ~5bp QoQ
* Asset quality exhibited minor deterioration with GS3 rising ~5bp QoQ to ~0.92% and NS3 rising ~3bp QoQ to ~0.5%. PCR on stage 3 loans declined ~80bp QoQ to ~45.2%.
* Provisions stood at INR221m (vs. MOSLe of INR121m) resulting in annualized credit costs of ~25bp [PQ: ~15bp and PY: ~35bp].
DSA sourcing mix declined to ~76%
* The average ticket size (ATS) of incremental housing loans stood at INR2.3m (PQ: INR2.5m).
* DSA channel in the sourcing mix declined to 76% (PQ: 80%).
Valuation and view
* CANF’s loan growth and disbursements were weak during the current quarter because of issues pertaining to registrations in Karnataka following the introduction of E-Khata.
* Asset quality exhibited minor deterioration while NIMs were largely stable. CANF might look to use its margin levers to deliver healthy loan growth in FY25 and FY26. We may revise our estimates and TP following the earnings call on 20th Jan’25.
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