Brokerage Hikes Can Fin Homes Target to ₹1,130 on Solid Q3
Overview
Can Fin Homes reported a robust Q3 FY26, marked by a 7% sequential disbursement growth and a multi-quarter high RoE of 19%. Despite elevated balance transfers, the company saw a significant reduction in delinquent loans. Analysts remain bullish, retaining their 'Buy' rating and raising the 12-month price target to ₹1,130, citing attractive valuations for FY28.
Stocks Mentioned
Can Fin Homes unveiled a robust fiscal third-quarter performance for FY26, exceeding expectations with key operational and financial metrics.
Strong Q3 Metrics
The housing finance company reported a significant 7% quarter-on-quarter increase in disbursements, aligning with prior guidance. This growth was complemented by an expansion in portfolio spreads and a notable reduction in its delinquent loan book.
SMA loans saw a substantial decline of 7% sequentially and 28% year-on-year, signaling improved asset quality. Profitability metrics also surged, with Return on Assets (RoA) reaching 2.6% and Return on Equity (RoE) hitting a multi-quarter high of 19%.
Balance Transfers Impact
However, elevated balance transfers, including loan closures funded by internal resources, persisted at approximately ₹400 crore for the second consecutive quarter. This trend partially constrained portfolio accretion to 2.6% quarter-on-quarter and capped overall loan growth at 10% year-on-year.
Management's guidance on future disbursements and potential margin contraction are key areas for investors to monitor. The ongoing IT transformation initiative will also be crucial in shaping operational efficiency.
Analyst Outlook and Valuation
Analysts have adjusted their forecasts, adopting a conservative stance on disbursements and IT system impacts compared to management's outlook. They anticipate loan growth to average 13-14% through FY27 and FY28, with RoE projected at 18% and 17% respectively.
Despite these measured projections, Can Fin Homes' valuation appears attractive, particularly on a fiscal year 2028 basis, trading at 1.6 times price-to-book value (P/BV) and 9.5 times price-to-earnings (P/E).
The firm rolled over its target multiple to FY28 earnings, leading to a revised 12-month price target of ₹1,130. The 'Buy' recommendation has been maintained, reflecting confidence in the company's outlook.
