Can Fin Homes an outlier thanks to strong parent

ET Intelligence Group: Can Fin Homesstock has gained 30 per cent since the declaration of its December 2019 quarter results on January 20, following the lender’s stable financial performance. Its loan book grew by 15 per cent year-on-year to Rs 20,171crore in the quarter. Net profit shot up by 41 per cent to Rs 106.6 crore, helped by strong growth in interest income and lower provisioning than that in the year-ago quarter. The stock performance of its peers, including LIC Housing Finance and PNB Housing Finance, remained sombre over the past month with 14.5 per cent and 6.4 per cent drop respectively. In addition, these stocks came under pressure on Wednesday after the news reports stating that the Reserve bank of India’s extension of the date of commencement of commercial operations (DCCO) for non-infrastructure projects by a year was applicable only to banks and not to housing finance companies.

Can Fin Homes, which is promoted by Canara Bank, a public-sector lender, has been an outlier since its affiliation with the bank is likely to benefit from the central bank’s initiatives to help the real estate sector.

Given its strong parentage, Can Fin’s cost of borrowings at around 7.9 per cent is lower compared with around 8.2 per cent each for LIC Housing Finance and PNB Housing Finance. Its net interest margin at 3.4 per cent is also better than under 3 per cent for the peers.

Can Fin plans to grow the loan book to Rs 40,000 crore by FY22 reflecting the expected annual growth of 36 per cent. At Thursday’s closing price of Rs 507.9 on the BSE, the stock was traded at a trailing price-book (P/B) multiple of 3.3, which is much higher than the P/B of around one for the peers. Given its superior business operations, the premium valuation of Can Fin Homes is expected to sustain in the medium term.

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