Jefferies sees a 32% upside in Can Fin Homes shares; here’s why

Long after Girish Kousgi announced his resignation, Can Fin Homes has finally zeroed in on Suresh Srinivasan Iyer, the ex Bandhan Bank housing vertical head, as the new managing director and chief executive officer (CEO).


“We believe this is a positive given Iyer’s long experience in the mortgage industry including as core management at Gruh Finance,” said global brokerage Jefferies in a research note, adding that the news is not a big surprise given media speculation around his appointment in recent months.

The brokerage firm has given a ‘Buy’ call on the stock with a price target of 699. The price target has a potential upside of 32 per cent from its current market price.

Can Fin has reported stable asset quality over the years across managements, but growth has varied. The new CEOs strategy to drive growth and manage margins would be the key in this context, analysts at Jefferies said.

Jefferies believes that margins at Can Fin can surprise positively after rates stabilise due to lag between repricing of loans and liabilities.

“72 per cent of its loans are yet to fully reflect the home loan rate hikes taken YTD FY23 (c 145 bps) as borrowers home loan rates are reset on an annual basis. Liabilities are mostly repriced within the quarter,” the note stated.

The global brokerage sees some moderation in loan growth, though it should still be healthy. Can Fin should deliver 16 per cent EPS CAGR and 18 per cent ROE over FY23-25e. At 1.6 times FY24E BV, valuations seem reasonable, it said.

Prabhudas Lilladher retains ‘Buy’ on stock

Meanwhile, brokerage firm Prabhudas Lilladher has also retained a ‘Buy’ rating on Can Fin Homes with an ‘unchanged’ target price of 700.

“Our FY23/24/25E PAT remains unchanged and Canfin structural story is intact with likely RoE of 17.0 per cent over FY23-25E, while valuation at 1.5 times is attractive. Rolling forward to FY25ABV, we tweak multiple from 2.1 times to 2.0 times,” the brokerage said.

Suresh Srinivasan Iyer has been appointed as the new MD and CEO with effect from 18 March 2023, initially for a fixed term of three years and further extendable to two years.

Can Fin Homes is engaged in a housing finance institution approved by National Housing Bank (NHB), the apex authority of housing in the country.

The company’s net profit advanced 30.9 per cent to 151.49 crore in Q3 FY23 on 39.6 per cent rise in total income to 709.71 crore in Q3 FY22.

Shares of Can Fin Homes plunged 0.21 per cent to settle at 529.10 apiece in Tuesday’s trade. The stock is down 29 per cent from its 52-week high of 685, hit on 7 April, 2022.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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