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Target: ₹700
CMP: ₹532.50
Can Fin Homes (Canfin) has appointed Suresh Iyer as MD and CEO with effect from March 18 for a fixed period of three years, further extendable for two years. He has 25 years’ experience of working in Gruh Finance across various functions like sales, operations, IT strategy, policy and pricing, risk, recovery, legal etc.
The MD and CEO appointment is positive as it removes overhang of a key management position lying vacant and increase business focus to aid loan growth.
Further credit momentum has been steady with 20 per cent YoY growth. The MD and CEO’s commentary on medium-term strategy is a key. With increased focus, we expect pace of business to enhance without diluting profitability or asset quality and hence our FY23-25 loan CAGR estimate of 17 per cent may see an upgrade.
As per the company, NIM has bottomed out in Q3-FY23 and would improve from hereon. NIM improvement would be led by assets repricing (28 per cent repriced till Q3-FY23) to RBI rate hikes compared with 65-70 per cent of liabilities. This suggests that overall NIM for FY24 could be higher vs FY23 and NII growth could surpass loan growth.
Our FY23/24/25 PAT remains unchanged and Canfin structural story is intact, with likely RoE of about 17 per cent over FY23-25, while valuation at 1.5x is attractive. Rolling forward to FY25ABV, we tweak multiple from 2.1x to 2.0x and keep target price unchanged at ₹700. Retain ‘BUY’.
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