Hi vivek
If you want to have exposure to NBFC sector and looking for turnaround then cholamandalam managed by murugupaa group is far better bet than canfin it has got better regional dominance than canfin
Their web sitehttp://www.canfinhomes.comtook ages to load.In cities customers normally access the website(if the branch is not in the vicinity) to get the phone number and to get branch details.
Just an observation and I know some good companies with very bad websites.
Housing Finance companies survive on the interest margin. The leverage is more of less fixed by capital adequacy. The primary factors that come into play are
1). Cost of funds(CF) - Players with good rating/ backed by high quality corporates like LIC/ HDFC score on this count
2). Lending rate (LR)- Mostly market determined/ but corporates catering to niche sector/ rural & semi-urban areas can charge higher rate and thus have better margins
3). Cost of Operations (CO) â economies of scale play a role / technologically advanced companies & companies with well-defined processes have lower cost / cost is lower for companies offering large ticket size loans
4). Credit quality â It depends on pedigree/ processes followed as well as aggressiveness of the lender. The NPA is expected to be higher for a HFC lending in
5). Growth â Aggressiveness/ expansion of network / quality of service all work towards bringing in the growth
6). Other Income â Cross selling
Currently the market is growing and there is space for all the players. In a stressed situation a player like HDFC is best placed to survive given low cost of funds, low cost of ops due to economies of scale and hence it can survive at the lowest possible lending rate (equivalent of a low cost producer).
But given the growth in the market, all players will grow.
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Canfin â I think there is a glaring undervaluation when a company with practically nil NPA quotes below the current book value of 182. (Indianivesh guys put the current book value at 182 and they keep on updating this data every quarter) Even screener.in gives book value at 182.
In current scenario, where other good quality HFC quote at almost 6-9 times book value, even if canfin can avail re rating to the tune of 1.2-1.3 times book we can easily look forward to a cool 50% upsides here.
These are the kind of bets I love to make.
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Spoke to their Northern chief . As guessed the new MD mr. C Ilango is the catalyst behind the new growth . He is 56 n should be in saddle for some more time. Also the IT CBS implementation is almost complete here. They are mostly a metro centric organisation n unlike GRUH donât extend loan to unbanked segments. Rural focus is there but not much.
The co should maintain strong growth as long as Mr Ilango is there . He has used strong motivation skills to boos the morale of employees n taking the co to new growth orbit.
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Can Fin targets to double its loansanctions to 2000 crâs.
http://www.thehindu.com/todays-paper/tp-national/tp-tamilnadu/article3644326.ece
Some more details.
- It has unique referral scheme and seldom uses agents for promotions and hence saves a lot on commissions.
2)It also have Unit Trust of India and HDFC as our major shareholders besides the public.
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If I am bankable to mainframe banks why would I take expensive loan from NBFC?
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Spoke to their Northern chief . As guessed the new MD mr. C Ilango is the catalyst behind the new growth . He is 56 n should be in saddle for some more time. Also the IT CBS implementation is almost complete here. They are mostly a metro centric organisation n unlike GRUH donât extend loan to unbanked segments. Rural focus is there but not much.
The co should maintain strong growth as long as Mr Ilango is there . He has used strong motivation skills to boos the morale of employees n taking the co to new growth orbit.
If NBFC?
See how interested is our typical PSB or mainstream private bank in a 6-7 lac Rs loan to tier 2 city resident n the turnaround time is 1 week. In mine personal experience HDFC n their DSA took nearly 2.5 months for disbursing a 50 lac Rs loan this November .
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So, can fin has hit upper circuit today.
Great way to start a new year.
HDFC Securities -stock note on Can Fin Homes with a target of 188.
http://www.hdfcsec.com/Research/ResearchDetails.aspx?report_id=2990252
Fantastic report by HDFC Sec. It is very comprehensive and for me, more enlightening than the drab ARs.
Also, almost all finance companies are doing very well - in anticipation of the rate cut, no doubt.
What caught my eye though in the entire report is not something in CanFin but Gruh. Gruhâs book value is tripling in FY2013 and hence on a FY13E basis, it is at 3.3x P/B. Could someone throw light on why this is so - and if it is logical, then the current prices look pretty attractive given the rating multiple the market gives to this stock.
Hitesh,
Agree on the undervaluation and it is probably blashphemy to go against your call 
But somehow, for me when you started the thread of Muthoot Capital, the case was open-shut up-buy heavily since the undervaluation screamed at me (and thanks for that given how the mkt re-rated it so quickly). In this case, I am wondering if we are betting on too many factors to go right - the rate cut, aggressive mgmt, number of branches, increased operating leverage, reduced cost income ratio etc. For now though, the mkt has given a 10% upmove and your thesis may be more right than mine.
Exactly what hit me. Tried to search the HDFC Sec site for coverage on Gruh. They do not seem to have any. Maybe the book value is pre-bonus? Which means it should be halved? Still at 63/2 that is 31-32, gruh will be availble at 240/32 =7.5 (approx) PB. which looks good going by historical valuations. However, assuming 25% growth in FY12 eps of 6.6 which is 1.256.6=8.25 (sees tough ask since HI FY13 eps is only 3, but historically H2 has been much better) and 25% dividend payout, means profit retained will be 0.758.25=6.2, which will be added to FY12 BVPS of 21 to give FY13 BVPS of about 27-28. compared to this 32 BV as per HDFC isnt too far off. at 240 and BVPS of 28, FY13 PB is 8.6.
sorry to clutter canfin thread with gruh calculations. maybe we can continue in gruh thread.
Hitesh bhai⌠great pick.
What I understand from the equity reports and studying annual report are three things which may lead to huge upside in the stock in the medium term:
- Undervaluation: With P/BV<1, it is the cheapest HFC (Dewan Housing Finance is an exception due to corporate governance issue)
- Turn around: If you go through the ARâs, the PAT of the company in 2011-12 would have shown a growth of 30 per cent year on year if the NHB wouldnât have directed HFCs to make 0.4 per cent provision (Rs.11 crore) for non housing loans. We need to understand one thing here, just see the growth in loan book and disbursements for the past one and a half year. This for me is a trigger for change in management stance towards higher growth momentum.
- Analyst Coverage: After Sharekhan, now Motilal Oswal is recommending the stock (http://www.moneycontrol.com/news/stocks-views/year-2013-motilal-oswal`s-largecapmidcap-picks_802389-5826.html). I think it will catch InstitutionalInvestorâseye soon which might lead to re-rating.
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Good points raised by Kiran. And yes, their website takes a hell lot of time to open up and these are poor things. These things would be factors influencing PE re-rating over a longer term.
Ayush
Spoke to a equivalent competitor of Canfin who is at a very senior position. His pithy comment was that sleeping giant has woke up now.
Could be one of the big out performers of 2013. I liked Motilal Oswal pithy report highlighting Canfin.
So the stock is finally off circuit today. Seems like traders are now exercising caution since its almost trading at book value now.
Manapuram up for different reason. RBI realizes that gold financing companies can be vehicles for monetizing 1 trillion worth of gold assets in our country
One more factor behind the improved performance is the critical role played by new Chirman Mr SR Iyer the ex dy MD of SBI besides Mr Ilango. This new team is taking the company to next orbit . Canfin is investing heavily into new branches whose no is slated to go to 100 , new staff many of whom are on contractual basis who will always be on toes,brand building by ad campaigns, exhibitions etc. The co has also invested into DSAs unlike earlier time where it was mostly custome r acquisition was in passive mode.
No wonder the co performance has shown great improvement but more importantly thanks to its attaining critical mass size in terms of no of branches the business will continue to show sharp improvement.
Also last year net profit was down by 11 crore due to RBI instruction on one time provisioning on non housing loans. Next year onwards the profit should show greater improvement.
Maximum wealth is created when PE also expands alongwith EPS . Canfin is going through one such phase.
Thanks r again due to our champ Hitesh Bhai for discovering this gem.please elucidiate how did u discovered the story was it due to screener or some other reason.
Is the risk reward ratio favorable to make an entry at cmp?