CMP: ₹293.3

Target: ₹390

Can Fin Homes is a housing finance company. The company offers housing loan to individuals; housing loan to builders/developers, and loan against property. Its loan portfolio includes housing loans and non-housing loans. Its housing loan products include individual home loans and various schemes related to the construction or purchasing of properties.

CanFin Homes has reported loan book growth of ₹1,826 crore in FY19 against ₹1,745 crore in nine months of FY18 growth of 4.64 per cent. Profit Before tax for Q3FY19 rose by 11 per cent and profit after tax (PAT) for same period rose by 13 per cent y-o-y basis. For Q3 PBT and PAT rose by +16 per cent and +21 per cent, respectively. Though net interest margin (NIM) for quarter ending Dec18 stood at 3.18 per cent and was flat q-o-q basis, we see cost to income ratio for 9MFY19 declining to 14.04 per cent against 15.29 per cent in previous year. There is an increase in yield for the company due to which spread has come down a bit. In spite of a sluggish market and recent turmoil in debt market, CanFin homes has performed well.

CanFin Homes is currently undervalued and trading at low earnings multiple as compared to industry average of 19. Company has maintained topline CAGR of 24 per cent for last 10 years. When we factor in the growth trends for estimates, stock looks a suitable investment pick for the long-term.

We recommend adding CanFin Homes to your portfolio at current levels and on dips for a target of ₹390 valuing stock conservatively at 17x of FY19e and 13x of FY20e earnings.