Can Fin Homes Q2 Results Review - NIMs Drive Outperformance; Asset Quality Improves Further: Systematix

Systematix Research Report

Can Fin Homes Ltd.'s Q2 FY25 results were marginally better than our estimates, as net interest income was higher at Rs 3.4 billion versus our estimate of Rs 3.3 billion, aided by higher-than-expected net interest margins at 3.75% (18 bps QoQ), even as AUM growth remains stable at ~10% YoY. However, due to higher opex at Rs 594 million (versus estimate of Rs 528 million), operating profit was in-line with estimates at Rs 2.9 billion.

Disbursements grew at a healthy pace of 18% YoY / 29% QoQ. Employee promotions and incentives, one off SARFESI resolution related expenses and marketing costs led to higher opex.

With steady yields and cost of funds, spreads improved marginally by 2bps QoQ at 2.6%. Credit cost declined by 13 bps QoQ leading to PAT at Rs 2.1 billion marginally better than our estimate of Rs 2.0 billion.

Asset quality improved further with gross stage III/ net stage III at 0.88% (4 bps QoQ) and 0.47% (-2 bps QoQ), while PCR on stage-III assets stood steady at ~46%.

In the past few quarters, disbursement growth was weak as the company was streamlining its processes. Going ahead we expect disbursements momentum to be maintained aided by push to affordable housing segment via PMAY 2.0 scheme.

We estimate a 16% CAGR in Can Fin Homes’s AUM to deliver 17% CAGR in earnings over FY24‐26E. RoA/ RoE expected to remain largely stable at 2.2%/18.4% over FY25/26.

We maintain our Buy rating with an unchanged target price of Rs 1,000 valuing Can Fin Homes at ~2.2 times FY26E book value.

Key risks:

1. higher competitive intensity may impact NIMs,

2. Demand slowdown for home loans.

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