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CanFin Homes (Buy)
CMP: ₹334.10
Target: ₹432
CanFin Homes has recorded a CAGR loan book growth of 31.4 per cent in five years ending FY18, mainly led by growth in housing loans. With the Centre’s thrust on affordable housing, we expect its loan book to clock a 17.5 per cent CAGR over FY18-20, with housing and non-housing segment growing by CAGR 17.8 per cent and 14.6 per cent respectively.
With aim to keep its niche in affordable low-ticket size housing loans intact, we estimate a healthy growth in CanFin Home’s loan book, which should increase its net profits at a CAGR of 19.3 per cent over the next two years. Yet, increased competition from banks with their lower retail lending rates might impact its business. Failure to lend more to non-salaried segment (currently 26.7 per cent of the loan portfolio) might slow down its NII (net interest income) growth. In view of our past valuation, we recommend buying the stock with target price of ₹432 (previous target ₹644) based on 2.5x FY20e BV for a period of 9-12 months.
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