Centrum Wealth

CanFin Homes (Outperformer)

CMP: ₹461.85

Target: ₹487

Can Fin Homes Ltd’s (CFHL) loan growth was lower at 18.7 per cent y-o-y compared to its past growth and compared to peers at ₹15,058 crore. While the housing finance industry was somewhat impacted by RERA, GST and demonetisation, CFHL’s loan growth seems to have got particularly affected more due to its higher concentration in South (76 per cent) where it faced lower demand and increased competition. For Q3, the other fundamentals remained strong with 16 per cent growth in net interest income, pre-provisioning profit up 23.7 per cent led by lower opex and 34.4 per cent increase in net profit. Asset quality weakened marginally with gross non-performing assets (NPA) increasing 6 bps q-o-q to 0.46 per cent as on 31 December 2017.

Recommendation: We believe, going forward, with recoveries coming in and expected decline in slippages especially in the non-salaried space, the gross NPAs will decline to 0.29 per cent by FY20E. We retain outperformer rating on the stock and arrive at a revised target price of ₹487, valuing it at 4.2x its FY19E ABV.

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