Can Fin Homes Q3 Results Review - Strong Guidance On Loan Growth But Execution Is Vital: Motilal Oswal

Motilal Oswal Report

Can Fin Homes Ltd.’s Q3 FY24 profit after tax grew ~32% YoY to ~Rs 2 billion (inline). Net interest income grew 31% YoY to ~Rs 3.3 billion (inline). 9M FY24 PAT rose 19% YoY to ~Rs 5.4 billion.

Opex grew ~13% YoY and declined ~6% QoQ to Rs 494 million because of the absence of annual incentives and one-off process enhancement expenses during the quarter.

Pre-provision operating profit grew 35% YoY to Rs 2.9 billion (in line).  Repricing of the last tranche of loans resulted in a ~10 bp QoQ improvement in yields. With cost of fund broadly stable QoQ, net interest margin expanded ~5 bp to ~3.7%. We model NIM of 3.8%/3.7%/3.6% in FY24/FY25/FY26.

The management expects an ambitious compound annual growth rate of ~20% in loans over the next four years, aided by-

1. lead originations from digital channels,

2. branch expansions and corresponding improvements in productivity, and

3. transition to higher ticket-size home loans.

We model an assets under management/PAT compound annual growth rate of 15%/16% over FY23-26E with return on asset/return on equity of 2.1%/~18% in FY26.

Can Fin Homes, in our view, is a robust franchise with strong moats on the liability side. However, we await a recovery in loan growth and early signs of execution on loan growth guidance before turning constructive on the stock.

At 1.6 times March-26E price/book value, we believe valuations largely price in the positive factors.

Maintain Neutral with a target price of Rs 815 (1.8 times March-26E book value).

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