Sales Note Can Fin Homes

7/29/2019 Sales Note Can Fin Homes

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Equity | India | NBFC

Can Fin Homes Ltd. November 16, 2

Analyst

Gaurav Oza

+91-22- 6614 [email protected] GEPL Capital Research

SalesNote

CMP (`) Target (`)

141.30 200

Potential upside Absolute Rating41.54% BUY

Market Info (as on November 16, 2012)

BSE Sensex 18,309

Nifty S&P 5,574

Stock Detail

BSE Group B

BSE Code 511196

NSE Code CANFINHOME

Bloomberg Code CANF IN

Market Cap (`bn) 2.87

Free Float (%) 60%

52wk Hi/Lo 147.00 / 87.50

Avg. Daily Volume (NSE) 75704

Face Value / Div. per share (`) 10.00 / 3.00

Shares Outstanding (mn) 20.4

Shareholding Pattern

Promoters FIIs DII Others

42.38 0.62 4.42 52.58

Financial Snapshot (`mn)

Y/E March FY11 FY12 FY13E

Interest Income 2263 2793 3350

Net Int. Income 721 837 985

% Change 15% 16% 18%

Pre-Pro. Profit 603 717 805

% Change 4% 19% 13%

PAT 420 438 560

% Change 7% 4% 21%

EPS 20.5 21.4 27.3

Share Price Performance

80

90

100

110

120

130

140

150

160

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Can Fin Homes BSE SENSEX Rel. Perf. 1Mth 3 Mths 6Mths 1Yr

CanFinHm (%) 27.0 41.9 36.1 45.1

SENSEX (%) 4.6 13.1 9.4 (9.1)

Source: Company data, GEPL Capital Research

Company Snapshot

Can Fin Homes Limited (CFHL), Non banking Financial Company (NBFC), is a close affiliate

Canara Bank (Public Sector Bank), with the bank owning over 42% of the total shareholding

the company, which forms a strong foundation for the company. CFHL incorporated over

years ago to promote HOME OWNERSHIP program in association with UTI, HDFC and NHB.

CFHLs loan portfolio is comprised of Housing as well as Non-housing loans such as Person

loan, Mortgage loan, Project loan, Child education loan etc.

Investment Rationale

Strong Loan Book & financials

CFHL operates is highly competitive business, where company needs to be very promp

sanction & disbursement of loans, needs to be competitive in terms of interest rates to

offered and all this to be integrated with the quality of loan. At CFHL 85%* of Loans appro

are disbursed, which indicates efficiency of the company to compete with its peers.

(*calculated on cumulative figure of last 5 financial year)

Companys outstanding loan amounts to `26.74 bn. at the end of FY2012, however L

disbursement in FY2012 stood at `5.89 bn. which CFHL expects to grow by 80% in FY13-14

`15 bn.

Company reported its Net NPA as NIL, where as its Gross NPA amounts to 0.7% of its total L

outstanding in FY12, which shows its high quality of loan portfolio. Company also provi

100% Provision on its doubtful loan.

National Housing Board (NHB) has cut its lending rate by 50 bps in September, and expected

cut more. Such cooling off of interest rate would directly reduce re-finance cost of CFHL

will further strengthen NII margin of the company results in higher profitability.

Divi dend Poli cyCFHL, been paying constant dividend ranging from 20% to 25% on its face value, since 19

This enhances investors confidence in the company.

Expanding branch network & loan portfolio

CFHL operates through web of 65 branches spread across India. However company intend

increase its branch network in order to cater large section of customers for Housing & N

housing Loans. Company had added 18 branches during last Financial Year where economy

dark clouded, shows its strength. Company is also exploring some potential locations

achieve its target branch network of 70 by March2013. It is also noted that with increas

number of branches & CFHLs guidance to such new branches regarding marketing strate

new branches are also likely to contribute in quarters to come.

The company is well established player in Tier 1 & Tier 2 cities for Home loan business

now company plans to focus on Non-housing loans (Such as Personal Loan) to retail, which

thought riskier but also highly profitable as compared to housing loans to the company.

Light After dark night for real-estate sector:

Urbanization and growth in household income will be a major driver in the real estate sa

growth, results in expected demand of Real estate to grow by CAGR of 19% till FY15. CF

being Housing Finance company, expects housing loan to grew by 20% forward.

The company is well established player in Tier 1 & Tier 2 cities for Home loan business, 43%

branches are located in such areas where prices of the real-estates are on the rising str

e.g. Bangalore, Chennai, Hyderabad, Mumbai, NCR region.


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quity | India | NBFC


EPL Capital Research| Sales Note

Bangalore Fuel t o growt h

Bangalore is a growing city and it is at that stage where large parcels of land in the gro

corridors are being lapped up. It is expected that in Bangalore scarcity of land starts to sh

which might lead to massive price appreciations in couple of years. In such situation, wh

company has marked its presence with 10 branches will be prima-facie in an advantage

position to witness growth both in terms of value & volume.

Efficient Risk Management

CFHL operates in the financing activity, where in re-financing becomes an issue for NBFC

However being public undertaking CFHL does not face such problem of capital infusion

funds its re-financing needs from National Housing Banks (NHB) & from Banks (short t

loan), which are closely affiliated to the company.

Generally advances are for long term (10-15 years) with an early repayment option, wh

generally does not correlate with companies Long-term borrowing/Loan (5-7 years

repayment plan, hence adequate risk mitigation strategies are required. As a part of it CF

follows strict risk mitigation by Internal Control system & periodical review of compan

operation in terms of its Liquidity risk, Interest rate fluctuation risk(on variable loan) as w

as quality control measures by introducing Tri- monthly review of all branches which hnew branches to break-even as early possible. In addition to all above controls, being pu

undertaking company follows all the required rules & regulation formulated by regulatory t

to time.

Risk

Being public undertaking, management of the company changes very frequently. CFHL are closely integrated with real-estate industry & Interest rate cycle hence any

negative force on such things may adversely affect the company.

Peer Comparison

Name CMP (`) No of Shares(mn)

Market Cap(` mn)

EPS(FY12)

P/E (x) BVS(SEP 2012)

P/BV (X),Sep,2012

DividendYield %

Can Fin Home 144 20.49 2,949.84 21.40 6.73 182.33 0.79 2.08

Dewan Housing 200 117.08 23,415.40 28.97 6.90 185.26 1.08 2.75

LIC Housing 255 504.66 1,28,689.07 19.20 13.28 121.92 2.09 1.41

GRUH Finance 205 177.85 36,459.25 6.44 31.81 25.10 8.17 1.12

GIC Housing 125 53.85 6,731.38 10.96 11.41 100.72 1.24 3.60

ource: Company data, GEPL Capital Research


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Valuations

With reforms expected from the government for the real estate sector, we believe anticip

growth in tier I and tier II cities in coming time. With efficient management of CFHL,

believe it will be one of the major beneficiaries of this expected boom. The companys eff

to increase in branches network and diversifying in personal loan segment will further spe

up the growth engine of the company.

CFHL trades at cheapest of all housing finance companies at 0.65x FY13E price to book and

of 5.4x of FY13E EPS, which is the cheapest of all housing finance companies. We recomm

a BUY rating on the stock with a target price of `200 at which the exit P/BV multiple is 1

and exit P/E multiple stands at 7.4x.

Key Ratios

Y/E March FY11 FY12 FY13E

GNPA (` mn) 235 190 217

NNPA (` mn) 0 0 0

GNPA % to Advance 1.1 0.7 0.7

CAR % 17.4 19.14 14

ROA % (Total Assets) 1.9 1.6 2

Interest Exp/ Interest Income (%) 68 70 70

Source: Company data, GEPL Capital Research


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NOTES

EPL CAPITAL Pvt Ltd

eg Office: D-21 Dhanraj mahal, CSM Marg, Colaba, Mumbai 400001

nalyst Certification

he following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive dir

direct compensation in exchange for expressing specific recommendations or views in this report:

ame : Gaurav Oza

ector : NBFC

sclaimer:

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Sales Note Can Fin Homes

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