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Prabhudas Lilladher Report
We increase multiple from 2.1 times to 2.3 times as we raise FY24/25E profit after tax by average ~6.5% due to increase net interest margin and reduction in provisions.
With return on asset of 2.1% for FY24/25E, likely return on equity trajectory has moved up from 16.5-17.0% to 18.0-18.5%. Can Fin Homes Ltd. reported yet another strong quarter with better pre-provision operating profit and profit after tax led by NIM beat and lower provisions.
Can Fin Homes’ asset quality blip was due to slippage from one time restructuring that was guided earlier.
We have consistently upgraded earnings since the last four quarters and with likely profit after tax CAGR of 18% over FY23-26E, there are levers for further earnings upgrade given-
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38% of loans are to be repriced upwards in FY24,
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interest rates have peaked, high proportion of floating rate borrowings could benefit and
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provisions could be lower as overlay is Rs 170 million despite 70% reduction in OTR pool.
Valuation at 2.2 times on March 2025 adjusted book value suggests limited upside although earnings quality remains strong.
Rolling forward to September-25 ABV, we raise target price to Rs 950 from Rs 770. Retain ‘Buy’.
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