Can Fin Homes (CANF): 1QFY20 Strong growth outside Metros

Dated: 24th July 2019

Result:

• Reported NII grew 17% YoY (+7% QoQ) for 1QFY20 to Rs 1,479 mn. Reported NIMs were at 3.18% showing an increase of 40 bps QoQ.
• In 1QFY20, PPOP grew by 15% YoY (+12% QoQ) to Rs 1,316 mn. Reported PAT grew 8% YoY (+21% QoQ) at Rs 810 mn.
• Loan book grew 17% YoY on the back of disbursements growth of 10% YoY.
• Asset quality deteriorated sequentially in 1QFY20. GNPAs and NNPAs were at 0.73% and 0.52% respectively in 1QFY20 compared to 0.62% and 0.43% respectively in 4QFY19.

Management commentary:

• The company expects to bring NPAs down to March 19 levels by 2QFY20.
• During the quarter, the company made NPA provisions of Rs 67.5 mn and standard asset provisions of Rs 19.1 mn.
• In Karnataka, AUM growth was 7%, while ex-Karnataka AUM growth was 22%. Overall, southern region grew 15% and non-south regions reported 20% growth.
• Growth in Metro cities is ~11% while non-metro growth is ~30%.
• The company expects to benefit from the new affordable housing projects coming up on the outskirts of Bangalore. Can Fin will be focusing on tier 2-3 cities.
• Management is hopeful of achieving loan book of Rs 23,000 mn by end of FY20

Consensus Estimate (Source: Market screener website)

• The stock price was Rs 390/- as of close price of 24^th July 2019 and traded at 2.5x/ 2.1x the consensus book value for FY20E / 21E of Rs 158 / 186 respectively. 
• Consensus target price is Rs 431/- implying P/B of 2.3x for FY21E book value of Rs 186.

Note:

NII- Net interest income

NIM- Net interest margins

PPOP- Pre-provision profits

NPA- Non-performing assets

AUM- Assets under management