Axis Direct's research report on Can Fin Homes
Can Fin Homes Ltd (CFHL) reported significant earnings growth of 49% YoY at Rs 71 cr which was led by healthy NII growth backed by strong advance growth and improvement in NIMs. CFHL, advance growth for FY17 was at 25% (as against 27% in Q3 FY17) at Rs 13,313 cr and management guided for 28% loan book growth in FY18 to reach Rs.17,000 cr. CFHL’s NII during the quarter was up by 36% at Rs 134cr. With operating leverage led by lower increase in operating costs CFHL’s cost to income ratio has declined to 17.2% as against 18.5% YoY.
Outlook
We believe valuation multiple expansion will be contingent upon sustainability of high loan book growth, further improvement in profitability and stable asset quality especially LAP. At CMP the stock trades at 5.1x its FY18E ABV and 3.9x FY19E P/ABV. We value CFHL at FY19E P/ABV multiple of 4.5x to arrive at target price of Rs.2900 and continue to have BUY rating.
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