Target: ₹625

CMP: ₹548.50

CanFin Homes (CFHL) is spread across 204 locations across 21 states and UTs with the South contributing about 72 per cent of loans and focusing on tier-II and -III cities. Most borrowers are first-time home buyers with an average age of 35 years. Housing loans comprise about 90 per cent of advances, of which about 74 per cent is to salaried customers.

Rising demand for own house, improved affordability, government support (PMAY) and low mortgage penetration in India remain catalysts for sustainable growth in the housing finance segment.

CFHL’s focus on non-metro cities (predominantly tier-II and -III cities) with relatively lower competitive pressure and well-defined, process-oriented credit disbursement is seen aiding business growth with low risk volatility.

K Strong parentage and consistent superior asset quality enables it to keep cost of funds lower and leverage higher, thus enabling better margins and RoE; Stringent cost control with CI ratio at 16-17 per cent ensures continued focus on maximizing productivity, which, in turn, would benefit the earnings trajectory. The HFC exhibited superior asset quality in the past. Focus on salaried segment and strong underwriting practices enable it to maintain steady asset quality.

Anticipated healthy earnings growth at 17 per cent CAGR in FY22-25E and RoA at about 1.8-1.9 per cent are expected to drive valuations.

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