Motilal Oswal has given Buy recommendation for Can Fin Homes recommended buy rating on the stock with a target price of Rs 610 in its research re with a target price of Rs. 610 in its research report issued on Oct 18, 2022
Motilal Oswal’s research report on Can Fin Homes
CANF’s 2QFY23 results reiterated that all the noise around asset quality/fraudulent accounts over the last two quarters have been addressed and there will be no unpleasant surprises as the current CEO Mr. Girish Kousgi steps down. Disbursements have gathered pace and we expect the momentum to sustain in the subsequent quarters. The only thing we would closely monitor is its impact on margins, wherein we estimate NIM compression of ~15bp YoY in FY24E. We model an AUM/disbursement CAGR of 17%/10% over FY22-24. Given that we do not expect any new negative developments in asset quality, we now estimate FY23 credit costs of ~16bp (v/s ~20bp earlier). Valuations can get re-rated to 2.0x P/BV, if the new (to-be appointed) management team (of MD & CEO/CFO/CRO) gains the investor confidence that CANF can continue delivering the same strong loan growth and pristine asset quality as it has been exhibiting under the leadership of the outgoing CEO. We reiterate our Buy rating.
The next leg of the re-rating in valuation multiple will be contingent on the appointment of the new management team and its ability to inspire investor confidence in loan growth and asset quality. We reiterate our Buy rating with a TP of INR610 (premised on 1.9x FY24E BVPS).