Canfin homes ltd

(sushilkc) #1064

Canfin Home is now down more than 25% from its high. . I have two questions/worries on mind -

  1. Is housing finance rally losing steam… Most of the housing finance shares are down 10-20% from top (except DHFL which is making new highs). Despite excellent results PNB Housing has not moved much.
  2. Canfin is relatively under performing others. Can it be case of PE de-rating for canfin OR is it just regular time correction? Repco is the other one which i see lost market confidence in last 1-2 years and hope canfin not going the same way …

Disc : Hold Canfin and PNB Housing.

(hemtan100) #1065

going by the compression in LIC HF’s margins, it does seem like banks are (and logically so) are providing intense competition to hfc’s.
PSU Bank recap bazooka can show further impact in 4 quarters.
It does seem like there is a downward calibration of AUM growth in CanFin - its fy18 guidance seems like a stretch although the management hasn’t given up on it yet.
PNB HFC’s growth numbers are stronger on the back of riskier non-home loan portfolio.
Mr. Market seems to be pricing in serious headwinds for the entire HFC sector barring DHFL which looks cheap on all parameters and Harshil Gandhi periodically talking up the stock.
Can Fin therefore is undergoing a derating and now trading at Fy19e P/B of 3.5 to 3.8 depending on estimates and PNB undergoing a time correction while the stock waits for valuations to catch up.

If the CanFin management were to be believed, RERA negative impact should recede by Q4 and they should be back to their growth ways. For a CanFin shareholder i would closely monitor any rights issue dates as that would be a precursor to CanFin returning back to 30% AUM growth.

(prash.peru) #1066

Canfin’s problem seems to be sluggish loan disbursement over the last few quarters (hardly any growth). This shows up in its lackluster loan-book growth as well. Right now the stock seems to be in a clear downtrend, so hardly makes sense to hold or buy more. Seems like a better choice to wait and watch the next quarter’s loan-book growth figures and decide. Hopefully things go well and you get a price that’s a bargain.

PNB’s problem is massive equity dilution. Just compare the company’s net profit and earnings per share growth over the last few quarters and you’ll see a vast divergence.


Do agree that there are multiple headwinds for the HF industry:

  • The Housing market didn’t recover yet fully from the DeMon blow (Black vs White economy)
  • No major launch of housing projects across the major cities, inventories getting liquidated at a slow pace
  • Loan ticket size shrinking
  • Newer entries into HF market increasing competition potentially shirking the market share pie.
  • No clarity yet on AH market and launch by major builders, which everyone looking forward for:

Though there is increasing competition from banks as well as increasing share, the HFC’s had been growing at a faster pace (Info - Reliance HF Q2 2018 investor presentation).

Problem of Canfin is for multiple reasons again in addition to the reasons highlighted previously:

  • It had a dream run thru the initial months of the current year. It could be catching some breath here.
  • Skepticism in the mind of investors on the kind of growth it could deliver going forward.


Well, while there is all around enthusiasm on the ReCap, some equally opine that it could be a “water gun” instead of a Bazooka.

Indeed, DHFL seems to be coming out of the past (corporate governance issues) and market looking for a re-rating. Could you be referring to Harshil Mehta the Jt MD CEO ?.

Discl: Exited Canfin prior to results at 553 (marginal loss). Continue invested in DHFL and IBHFL.

(prash.peru) #1068

Talking about DHFL making new highs while other HFCs lag behind, here’s probably what explains it (a sharp rise in DHFL’s net profit growth rate beginning q1 2017, which is perhaps leading to an equally sharp re-rating):

q2-2018: 26.1%
q1-2018: 29.8%
q4-2017: 30.9%
q3-2017: 29.5%
q2-2017: 29.9%
q1-2017: 38.2%
q4-2016: 16.9%
q3-2016: 16.4%
q2-2016: 18.5%
q1-2016: 17.8%

(Bobby Mehrotra) #1069

Can Fin’s chief in his latest concall mentioned that the demand for AH is huge. Supply is a constraint as of today. According to him, FY 19 and FY 20 are going to see huge growth rates in AH. After which the industry will see some consolidation.
Can Fin is also a pure AH play. More that 90% of the disbursals are in the AH space. So growth for Can Fin, as I see it, wld come only when supply improves. And improvement in supply is not going to happen overnite.

(prash.peru) #1070

Hi Bobby, do you have a transcript of the call by any chance?

(Bobby Mehrotra) #1071

Sorry no. But chk research bytes. Maybe they have uploaded it there.

(prash.peru) #1072

No issues. I’ll keep an eye out there.


You can always check out for concall voice recording

(prash.peru) #1074

Thank you, newone. The audio doesn’t seem to be available though. I mean, the “Click here to start audio” hyperlink is not real.

(ramanhp) #1075

The audio link on the website does not works. Try to install their App. It is much easier to listen to con-call from the App. I did for Canfin and other companies regularly.

(tankerooooo) #1076

Try switching the browser. On my computer, researchbytes audio calls do not play on Chrome but do play on Internet Explorer.

(Rupesh Tatiya) #1077

Slide from Investor Presentation ->

Some Data ->

One reason for phenomenal growth of CFH over last 3 years is 50%+ growth rate in lending to non-salaried class. So much so that portion of lending book to non-salaried class went from 12% in FY14 to 24% in FY17. The lending rate to non-salaried class would be higher and hence better NIM, PAT, RoA etc. The growth rate has come down to 18% in H1FY18. (36% annualized)

I guess management probably decided to take a pause when 25% of lending book belongs to non-salaried class. Also there might be intense competition from banks in salaried pie and hence that growth rate has come down to 14% annualized. (7% for half year)

I think management has to (or wants to) decide “how” to grow from here rather than “how much”. Do you continue lending to non-salaried class and grow at higher rate or grow at slower rate and lend to salaried class with lower risk/return?

Disc - Sold almost entire position pre-split of shares, ~2% position to track developments. This is not buy/sell recommendation.

(Peabody) #1078

Public sector banks cannot compete in AH space like Canfin or Gruh.Their main focus will be urban/semi urban areas only and to Corporates.The decline in share price is obviously a correction given the slowing growth rates. I guess by Q1/Q2 it should start moving again assuming growth picks up.The AH runway is very long despite so many players jumping in. Do not assume for a while that Reliance Home Finance will get into AH space-they neither have the execution capability nor management bandwidth.It is a me too business. The rise from 1500 in Jan to 3330 in June was too fast and now the correction.


Not sure Prash. I could listen to it using chrome. But try from your laptop / desktop and not via mobile.

(hemtan100) #1080

(ramanhp) #1081

@hitesh2710. May I request your input please ? CANFIN has been a great stock for past few years now. Looks like the company has some resistance ahead in terms of sustainable high growth. Is it possible for you share your thoughts on this or for that matter in such situation.

(Vishal Bharti) #1082

Hopefully this not turn out to be a Hawkins Cooker which has not moved much over the last 3-4 years. It had great return ratios like Canfin just that the growth was meagre.
BTW, leaders show good growth in tough environments also. PNB Housing has come out as the leader of the pack for now. They also say they will grow smarter than industry(~1.5x)… Imagine how much it will be able to grow when environment improves etc…


@hemtan100, can you pls add gruh finance numbers as well to this list? Thanks