Jefferies retains ‘buy’ on Can Fin Homes; sees over 25% upside
- Hot Stocks
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In July this year, the housing finance company, promoted by state-owned Canara Bank, reported misappropriation of funds worth Rs 38.53 crore at its Ambala branch.
Housing demand in mid to high ticket segment has been strong, Jefferies said
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Can Fin Homes has tightened internal controls following the recent case of fraud at its Ambala branch, and the company is likely to benefit from robust home loan demand and steady asset quality, foreign brokerage firm Jefferies said.
Jefferies interacted with Can Fin Homes’ CEO Suresh Iyer, who said no major issues were detected at other branches post a detailed review.
In July this year, the housing finance company, promoted by state-owned Canara Bank, reported misappropriation of funds worth Rs 38.53 crore at its Ambala branch.
Can Fin Homes says that the fraud was committed by three of its employees by transferring funds to different personal bank accounts, primarily by misusing the cheque signing authority given to them.
“Can Fin conducted detailed reconciliation of accounts (debit balances vs. disbursements) at each of its 193 branches for the period April 21-July 23 after employee fraud was detected at Ambala branch. No major issues/ losses were detected beyond the Rs 385-390mn initially assessed,” Jefferies said in a note.
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To tighten internal controls, it has taken steps like centralized reconciliation, daily monitoring for cash management at the head office for all its branches and setting up a fraud control unit. It is also shifting to centralized disbursements in the next couple of weeks, Jefferies added.
Growth Drivers
Housing demand in mid to high-ticket segment has been strong. Despite some impact on disbursements due to the branch fraud issue, disbursements should be better in the September quarter and improve further in H2 FY24, as per management.
“Can Fin has approved around 15 projects under the new advanced processing facility segment (home loans in approved projects), though incremental business would flow with a lag. It plans to add 14 branches in FY24…Management maintained loan growth guidance of 18 percent in FY24 (our estimate 17 percent),” Jefferies noted.
The company reported a 13.1 percent year-on-year (YoY) jump in net profit at Rs 183.5 crore for the first quarter that ended June 30, 2023.
Net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors, jumped 13.9 percent, coming at Rs 285.1 crore against Rs 250.4 crore in the corresponding quarter of FY23.
The management expects net interest margins (NIMs) to be range bound (Q1 at 3.56 percent), but the brokerage firm sees scope for a positive surprise.
“We forecast NIMs of 3.63 percent in FY24,” it said, adding that the asset quality environment remains stable.
Jefferies has retained its ‘buy’ call on the stock, with a target price of Rs 970, which represents a potential upside of over 25 percent from its current level of Rs 760.
Shares of the company are up 40 percent on YTD basis, while the 1-year return stands at 17 percent.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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