Buy Can Fin Homes; target of Rs 550: YES Securities

YES Securities' research report on Can Fin Homes

Can Fin’s Q2 FY21 result was exceptionally strong on the back of sharp NIM improvement and modest provisions (backed by management assessment of potential stress and extant healthy provisioning buffer). We concur with management that NPL increase and restructuring quantum would not be significant considering encouraging collection trends (93% in Sept and 96-97% in Oct) and customer profile of the book. Credit cost from H2 FY21 is expected to large normalize (15-20 bps annualized).

Outlook

On a cross-cycle basis, we believe Can Fin is 1.8-2%/18-20% RoA/RoE franchise. Valuation (currently at 2.1x FY22 P/ABV) can re-rate further on loan growth pick-up and execution of the planned capital raise. Retain BUY with 12m PT of Rs550.

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