Prabhudas Lilladher has maintained a positive outlook on Can Fin Homes, projecting a target price of ₹1,075. The report highlights strong first-quarter disbursement growth of 29.5%, though analysts are keeping a close watch on loan run-down rates and rising operational costs due to expansion.
Detailed Coverage
Can Fin Homes has reported a notable increase in its lending activity during the first quarter, with disbursements rising by 29.5% compared to the same period last year. This performance has drawn attention from analysts at Prabhudas Lilladher, who have reiterated their positive stance on the stock with a price target of ₹1,075. The company’s focus on expanding its branch network and increasing its workforce appears to be the primary driver behind this lending momentum.
Factors Influencing Growth and Margins
While the company continues to see strong demand for housing loans, the business is navigating a higher loan run-down rate of 4.4%. This factor has tempered the net growth of its loan book, which currently stands at approximately 11% year-on-year. Looking ahead, the brokerage expects the company’s loan book to grow by 14% in fiscal year 2027 and 13% in fiscal year 2028, supported by persistent demand in the housing sector.
Regarding profitability, the company’s Net Interest Margin, which measures the difference between interest earned on loans and interest paid on deposits, is expected to settle around 3.75% for the coming fiscal years. Investors should be aware that the company is currently spending more on business transformation and branch expansion. This is expected to keep the cost-to-income ratio elevated at approximately 19% throughout fiscal year 2027. Essentially, while the company is growing, these expansion costs are putting temporary pressure on its operational efficiency.
Asset Quality and Future Monitorables
Asset quality, often measured by the level of bad loans, remains a central point of interest for long-term investors. Analysts anticipate that credit costs, or the money set aside to cover potential loan losses, will remain low at around 10 basis points for fiscal year 2027. This suggests that the quality of the company's loan portfolio is currently stable.
Moving forward, the primary items for shareholders to track include the actual pace of loan book growth against the projected 13-14% targets and whether the higher run-down rates begin to stabilize. Additionally, investors may want to monitor whether the company’s investments in new branches and technology begin to translate into improved operational efficiency or if the cost-to-income ratio remains under pressure.