Can Fin Homes Q2 Results Review - Inline; Higher Margins Offsets One Off Provisioning: Systematix

Systematix Research Report

Can Fin Homes Ltd.’s Q2 FY24 net interest income was ahead of estimates, on the back of 32 basis points QoQ expansion in net interest margins to 3.8%, even as assets under management growth was moderate at 16% YoY (2.5% QoQ).

However due to higher-than-expected provisioning, profit after tax was in-line at Rs 1.6 billion. Gross/ net stage-III assets increased slightly to 0.76%/0.43% from 0.63%/0.34% in Q1 due to slippages from restructured book.

AUM/ disbursement growth was moderate due to negative sentiments on account of Ambala branch fraud and slightly tightened processes; however, management is confident to cover the shortfall in Q3 and Q4.

We estimate a 19% compound annual growth rate in Can Fin Homes’ AUM to deliver 17% CAGR in earnings over FY23‐25E.

We expect the return on asset/ return on equity to remain largely stable at ~2.0%/ 18% over FY24/25 as lower margins on higher ticket loans to get offset by repricing benefit on existing book.

Key risks:

Inflation pressure might impact the demand for home loans.

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