Broker's call: Can Fin Homes (Buy)

Target: ₹550

CMP: ₹483.60

Can Fin Home’s loan book grew at 6.3 per cent y-o-y, whereas it shrinked marginally over the last quarter impacted by de-growth in non-salaried class customers. Although overall growth was marginally down, Can Fin’s results remained strong.

Although, Interest income grew marginally by 0.37 per cent sequentially, Net Interest Income (NII) grew 10 per cent q-o-q and PAT recorded strong growth of 38 per cent driven by lower cost of funds and provisions. The company has maintained its historical exposure of 71 per cent to the salaried and professional class and 29 per cent to the self employed class.

Improvement in NIM to the tune of 39 bps happened as lower cost of funds offset lower yields from loans. The management has clearly guided that current levels of NIM and spread are not sustainable and will normalise to 3 per cent and 2.4 per cent respectively over the long run.

Can Fin Homes has more than doubled its disbursements in the current quarter to ₹825 crore from ₹401 crore in Q1-FY21. Currently, disbursements stand at 70 per cent of its peak level and management expects to reach 85 per cent of peak level by end of this financial year.

We expect single digit growth of loan book this year due to higher repayments and competitive pressure from private banks.