Centrum Broking
Can Fin Homes (Buy)
Target: ₹770
CMP: ₹658.5
Can Fin Homes (Canfin) earnings were healthy on better loan growth while asset quality was largely in-line. Disbursals bounced back sharply being the highest ever at ₹2,210 crore (est. ₹1,800 crore). Guidance for disbursal growth in Q3/Q4FY22 is robust and average for these quarters may be better than Q2FY22. BT-out in H1FY22 normalised despite upward repricing, reflecting improving customer retention.
Hence we raise our AuM growth estimates for FY22 from 14–16 per cent. Commerical paper share is expected to reduce as NCDs worth ₹750 crore would be raised in FY22 while if systemic rates go up, Canfin could rely on NHB/Bank.
This could partly mitigate interest rate risk. GNPA/NNPA reduced q-o-q to 0.8 per cent/0.5 per cent. OTR-1&2 pool stood at 2.7 per cent with a 10 per cent cover of which only 7–8 per cent could slip to NPA over the near to medium term.
We have lowered/raised our provision/NII estimates for FY22/23 which would not materially impact earnings. Focus on growth with credit quality could benefit Canfin given the affordable housing potential.
We roll forward to Sep’23 ABV but maintain multiple at 2.8x raising target price to ₹770.