Target: ₹1,000

CMP: ₹768.35

In the Investor Meetings hosted by us, Can Fin Homes has expressed significant confidence in delivering improved disbursements and loan growth and lower NPLs and credit cost over the coming quarters. Spread/NIM is expected to remain resilient in the near-term and glide towards the guided level of 2.5/3.5 per cent in the medium term.

Management’s aspiration is to grow loan assets 2-3 per cent above the industry without compromising on risk profile and profitability. Capital raising is not required for 15-17 per cent loan CAGR considering expected sturdy RoA/RoE of 2-2.2/17-18 per cent. T

The underwhelming factors of recent quarters, which is sub-optimal disbursements and higher slippages, would significantly turnaround in coming quarters. Hence, the valuation focus/narrative would shift to steady-state growth and profitability (which has been healthy for Can Fin).

Current valuation of 2.1x P/ABV and 12x P/E on 1-yr fwd. basis, which is significantly below long-term mean, does not fully reflect the high likelihood of a stronger disbursement and credit cost performance. Can Fin’s healthy RoE of 18 per cent also needs to be valued in the context of lower risk and variability associated with it (Avg. RoE of 19 per cent for the past 10 years).