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Can Fin Homes - Q1 FY22 first cut - YES Securities

Posted On: 2021-07-25 07:20:29 (Time Zone: UTC)

(only P&L available) - 'A marginal miss'

- PAT was 5% lower than our estimate (elevated than consensus) - however at Rs1.09bn, it stood higher 6% qoq and 17% yoy

- The earnings miss large came from NII shortfall (also 5% below our expectation) - likely pressure on NIM could be seen, despite lower incremental CoF, from back-book re-pricing - difference of 150-200 bps between repricing rate and legacy rate - lower disbursements also a negative factor for NIM, as incremental spread are handsome at 2.5%+

- Can Fin has increased Home Loan rate by 50-60 bps to 7.5% during Q1 FY22 - this could stem further NIM decline

- Opex declined 30% qoq on lower business activity

- Provisioning at Rs65mn seem prudential given our understanding of little impact of the second wave on asset quality - additional provisioning buffer as of March was at Rs700mn (30-35bps of loan book) - the unutilized cover could be partially written-back in this year

- Difficult to pass a verdict on performance in absence of business data. However, basis broad numbers, it seems marginally below expectations. We will review estimates post Management interaction. Though it is unlikely to change our current expectation of a re-rating in valuation from 2x FY23 P/ABV on estimated strong BV compounding

- Can Fin has the best balance sheet amongst HFCs with zero construction finance exposure, granular retail home loan and LAP portfolios, high proportion of prime Salaried customers, a large contingency provisioning buffer and strong Tier-1 capital of 24% (DER 7.4x)

Highlights from Investor Presentation

- Loan assets growth at 0.5% qoq and 7% yoy was in-line with expectations - Disbursements at Rs9bn v/s estimate of Rs10bn

- NIM at 3.3% v/s 3.7% of Q4 FY21 and 3.9% for FY21 - Portfolio Yield and Cost of Funds decline by 140bps and 100 bps qoq respectively - Portfolio spread falls to 2.4% from 2.8%

- Last three quarterly NIM in backward flow 3.3%, 3.7% and 4.1%

- 4% shift in borrowing mix from Banks to NHB and maintaining the share of Market Borrowings at 26% (CP was 20% of this as of March) were key drivers of funding cost decline

- Gross/Net NPA 0.90%/0.57% - no movement in 90+ is positive - implies provisioning in Q1 was largely prudential in nature

- NIM and Spread has reverted to historical bands - NIM at 3.3% and Spread at 2.4% - So the impetus on sustaining competitive pricing and preserving/gaining market share will come down - repeating Q4 FY21 growth performance would be a dauting ask now

Shares of CAN FIN HOMES LTD. was last trading in BSE at Rs. 533 as compared to the previous close of Rs. 543.7. The total number of shares traded during the day was 28964 in over 1388 trades.

The stock hit an intraday high of Rs. 550.4 and intraday low of 529.2. The net turnover during the day was Rs. 15572747.

Source: Equity Bulls

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