Can Fin Homes lost over 3% in trade on Monday September 26, 2022 and was trading at ₹502 per share at 9.28 am on the BSE.
It has dropped 22 percent last week after Girish Kousgi, the company's MD and CEO, resigned for personal reasons. The company said that in filing with BSE that Kousgi would be relieved on October 20 after office hours.
The stock has been in a downtrend since September 16 and has remained so until September 23. On Friday, the stock closed at ₹518, down 4.49 percent and currently trading at a four-month low.
Can Fin Homes, promoted by Canara Bank, is a housing and finance company that is focused on primarily providing housing loans. Over the last one year, the stock has underperformed the benchmark by falling 22%, and it is down 14.50% in the last six months. However, the stock has risen 26.06% in the last three months.
Can Fin Homes reported solid Q1 numbers. Its net profit rose 49% to ₹162.31 crore as against ₹108 crore in the corresponding quarter of the preceding fiscal. Pre-provision operating profit (PPOP) increased by 10% quarter on quarter (QoQ) and 40% year on year (YoY) to ₹215 crore.
Post Q1 results, domestic brokerage firm Edelweiss has given a 'buy' call on the stock with a target price of ₹800/share.
Edelweiss said that the Can Fin homes beat their estimates in terms of net revenue (NR), PPOP, and PAT by 6%, 8%, and 23%, respectively. Despite AUM being in line with their estimates, the yield expansion, combined with lower operating expenses and negative credit costs, contributed to the beat.
The company's AUM grew by 24% YoY and 3% QoQ to ₹27,538 crore and disbursements stood at ₹1,722 crore, up 39% year-on-year, aided by a low base of Q1 FY22, but de-grew by 32% QoQ. Lower disbursement growth was offset by a lower calculated repayment rate of 13.4% (annualized). AUM growth was seen across the board, with housing loan AUM increasing by 23% YoY. Top-up loans and mortgage loans/Flexi LAP saw even stronger momentum, growing 38% and 40% YoY, respectively. The management expects the loan book to grow at 18% for FY23, Edelweiss said.
Net revenue rose 5% QoQ to ₹255 crore, driven by the widening of spreads by 11 bps QoQ to 2.7%. Spread improvement was mainly led by the repricing of yields, resulting in a 35 bps QoQ yield expansion to 8.5%. Edelweiss added that the yield expansion was higher than the increase in the reported cost of funds to 5.8%.
GNPA and NNPA were largely stable on a sequential basis at 0.65% and 0.30%, respectively. Year-over-year, GNPA and NNPA improved by 25 basis points and 27 basis points, respectively. Net interest income (NII) rose 38% YoY and 5.5% QoQ to ₹250 crore.
After the Canara Bank audit due to the whistle-blower complaint, all the branches were audited by an internal audit team and multiple external audit firms. This resulted in the detection of additional irregularities of INR2.43cr, which have been fully provided. Out of the restructured assets, the management anticipates only 5% to slip into NPA from 7% earlier, Edelweiss noted.
Another domestic brokerage firm, Motilal Oswal, has a target price of Rs. 640 on Can Fin Homes, implying an upside potential of 23.55 percent from its previous closing price.
"We model an AUM/disbursement CAGR of 16%/9% over FY22-24. Based on the above development, "we expect credit costs of 22bp and upgrade our FY23 EPS estimate by 7%. "Valuations can get re-rated to 2x P/BV if the management can continue to deliver the same pristine asset quality over the next few quarters." the brokerage stated
Further, Prabhudas Lilladher also maintained a 'buy' call on the stock with a revised target price of ₹675/share from ₹800/share. It expects credit off-take to improve. “We envisage a loan CAGR of 17% over FY22–24E. The salaried to non-salaried mix in the medium term could be 70:30, up from 74:26 now. The entire asset book is the floating rate with an annual reset, and usually, 20% is repriced each year. On the liabilities side, 50% of borrowings are floating with a quarterly reset. Owing to this ALM mismatch, we are factoring a NIM compression of 15bps YoY to 3.1%. The average tenure of loans is 8.5 years, while that of borrowings is 7–10 years.” said the brokerage.
An average of 11 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.