Nice set of numbers.
Total income up 48%, PAT up 30%.
Book value is 209/- Rs per share now.
Quarter’s annualized ROE also up from 14.7% (in Sep 2012) to 17.5% this quarter.
Hi,
Good results again. 30% growth in PAT and 50% growth in income in such conditions indicate that Canfin is strongly placed.
Looks like NIM is above 3. This 101% increase in other exp seem to have affected the PAT. Both DSA commission and provision for std assets have led to this.
Loan Book has grown by 54% compared to HY-1 FY13. They will endup with a loan book of 6000 Cr+ easily.
So we have Rs 35 EPS for the year, Rs 5 dividend and Rs 221 Book Val. ROE 17% and ROA 1.77%, div yield 3.3%. NPA is not an issue at all.
For most HFCs H2 is good, for HDFC very good. But last year we saw that H-1 was 48% of full year for Canfin. If this year they align more with industry then EPS and push hard in H2, will be closer to Rs 40 eps and Book Vakue easily above 225.
Cheers
Vinod
Disc: Invested
Hi Viond,
How do you get this?
Also what is current loan book? Can we say it around 4928 crs (loan term + short term loans & advances)??
Vinod - Share of low cost NHB loans was steadily increasing for Canfin which in turn must be driving NIM; with guidelines of maintianing 2% spread what impact do you think this will have on bottomline?
Hi Jatin,
Yes I just added the long term and short term advances which gives a figure of 4900 Cr.
Even for the March balance sheet these two line items added up to almost the declared loan book. Short term advances in current assets should be that part of the loan book which matures in a year.
Rahul,
NHB funding is not always cheap, last year they picked up most debt from NHB as the rates were attractive. They have different schemes with different rates. The NIM does not seem to be under pressure as in the case of other NBFCs. It might decline to 2.75 in the worst case which itself is higher than most other NBCFs operating in the salaried segment. They are able to pass higher costs. If you see they have always charged a slightly higher rate than other players. I understand that their service is very good, turn around time is 7 days for loan disbursement and customers are largely from the middle class first home buyer category. This business does not get affected much even when there is negative sentiment in the real estate sector.
The loans for commercial segment was less earlier. This segment seems to be increasing now which can support NIM. A 10-15% contribution from commercial loans is healthy if done cautiously. HDFC has 25-30% from this segment.
Cheers
Vinod
This company though technically under PSU tag which I believe is the major reason for its poor PE is really performing like a well run Pvt sector co.
The co has rapidly expanded its offices from 40 which was constant for nearly a decade to 77 now over last 3 years. This no will go up to 85 shortly. All these offices have turned profitable in a short span underlying huge demand for mortgage in India.
Moreover if you go through job portals n ads the co is one of the heavy recruiters in recent times . Same is the case for enrolling more DSAs. Most of these employees are employed from local region where the market is n ON CONTRACT. This means performance is the only criteria . Hence co is growing nicely.
I believe if the size of pond is large n keeps growing every year we need not worry abt size of fish. Canfin implies huge opp size under a competent management.we need to simply buy n hold.
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Vivek,
If we agree that the recent change in performance is due to/driven by the current mgmt. then we have a genuine reason to worry here.
As per bank officers service agreement, they are normally posted to a position for a period of 3 years. Transfer is expected after that, although there could be exceptions.
A related question was raised by mr. Naga brahma in the last AGM , and mgmgt.'s standard reply didn’t inspire confidence in me.
http://www.bseindia.com/xml-data/corpfiling/AttachHis/Can_Fin_Homes_Ltd_161013.pdf
IMHO , if we are looking for a mere uptick in valuation , then it may come anytime. But if we are looking to ride the good market potential in the mortgage sector over years to come, can fin doesn’t look to be the no.1 choice, better alternatives are available in the market, though costly, and often for good reason.
Link: http://www.bseindia.com/xml-data/corpfiling/AttachHis/Can_Fin_Homes_Ltd_161013.pdf
Well said Raj.Extending credit to unbankable/self employed people is a very risky business.When an investor buys equity from this business sector he must realise that he is taking extra risk.Hence it is always advisable to stay with companies run by professional and stable managements with well established risk assessment procedures.This sector is entirely different than other business sectors and theory of finding next best/next cheaper stock will not work here.There is absolutely no margin for error and one has to go with sector leader.
If one has to look at cheaper stocks, there are plenty of them available in relatively safer business sectors,with lesser risk.
Thanks prasad,
This lesson didn’t come easy 
came from holding it for about year with huge opp. Cost, when so many of our other vp holdings like Atul auto, ajanta pharma, pi etc gave fabulous returns.
Previously Raj Panda wrote
Raj,
This has more to do with the whole banking sector which hasn’t given much returns during the past 10 - 12 months.
Please find below the link which compares the returns of few of the HFCs stocks as well as banks. I have tried to compare good quality HFCs as well as private banks (may be we can consider DHFL as an exception):
Even Gruh Finance hasn’t given much returns over the past one year.
Also, we cannot generalise that all PSUs are not run professionally. In addition, if Gruh Finance can extend why can’t a company like Can Fin can? (I do understand that Gruh Finance belongs to HDFC group and its quality can not even be compared to Can Fin). And, HFCs can not be compared to micro finance companies. It is secured lending unlike micro finance.
If we look at the triggers for the company, we can see that it is expanding branches, its loan book has been growing at a healthy pace, its profits are growing and NPAs are under strict control. Just because it hasn’t given much returns, we can not say its a bad investment. We will have to keep patience with turnaround kind of stocks. I think even if re-rating doesn’t, the earning growth itself can lead to gains in stock price.
Regards,
Ankit
PRASAD V. K. wrote:
Hi Ankit,
I agree on the positives/triggers that you mentioned. But they seemed to be driven by the current management and what i am trying to say, there is a question mark on how long the current mgmt. will be around.
Generalization about PSU work-culture,HFC not being same as micro-finance are broader topics. Will leave out the discussion on them this time
Am not concluding, that just because, it didn’t give return in last year it’s a bad investment.
Opportunity cost is a big influencing factor in investing and am also a new student of the subject. While am also invested in Gruh, am not applying the logic of no return in last year hence need to get out on it. Because i see a higher possibility of Gruh continuing their good performance for next several years, (with some hiccups along the way,may be) and price will follow business performance over period of time (not my line).
I am not getting same comfort level in Can-fin because i see question marks beyond 1-2 years of performance.
In short term, anything can happen. Canfin might run up 50% in next 1 month, and i might look stupid
Regards
Raj,
This has more to do with the whole banking sector which hasn’t given much returns during the past 10 - 12 months.
Please find below the link which compares the returns of few of the HFCs stocks as well as banks. I have tried to compare good quality HFCs as well as private banks (may be we can consider DHFL as an exception):
Even Gruh Finance hasn’t given much returns over the past one year.
Also, we cannot generalise that all PSUs are not run professionally. In addition, if Gruh Finance can extend why can’t a company like Can Fin can? (I do understand that Gruh Finance belongs to HDFC group and its quality can not even be compared to Can Fin). And, HFCs can not be compared to micro finance companies. It is secured lending unlike micro finance.
If we look at the triggers for the company, we can see that it is expanding branches, its loan book has been growing at a healthy pace, its profits are growing and NPAs are under strict control. Just because it hasn’t given much returns, we can not say its a bad investment. We will have to keep patience with turnaround kind of stocks. I think even if re-rating doesn’t, the earning growth itself can lead to gains in stock price.
Regards,
Ankit
Thanks prasad,
Previously
1 Like
let me give brief data about how cheap can fin is.
Company CMP Mcap Loans(FY13) CAR ROA ROE GNPA P/E P/B
HDFC 807 1276 1700 16.2 2.8 22.0 0.7 22.5 4.5
LICHF 202 106 778 16.5 1.5 16.8 0.6 8.1 1.4
Dewan 168 20 361 16.5 1.7 17.9 0.7 4.2 0.6
Gruh 230 42 54 14.6 2.9 33.0 0.3 24.0 6.6
Repco 295 18 35 25.5 2.5 17.1 1.5 15.8 2.4
GIC 97 5 45 14.0 1.8 17.1 1.9 5.4 0.8
CanFin 145 3 40 14.7 1.6 14.6 0.4 4.4 0.7
Source: Bloomberg, Edelweiss research
so even if it grows at 15-20% for next 3 years ( which is very easy looking at branch exp., size of market & speciallyBangaloremarket )
with decent div.yield, least NPA , and if cost of fundsstabilize(or even rates may decline)
it can be a multi bagger (3X to 5X)from here .
from : Kunal Shah
Disc ; hold can fin as 35% of myportfolio.
I am expecting good results for Dec end quarter.
My Q3 estimates-
3Q14E 3Q13
Revenues 150 103
PAT 18-20.3 12.6
Disclosure- Invested.
| period | q1 fy 13 | q1 fy 14 | 9M fy 13 | 9M fy 14 |
|---|---|---|---|---|
| sales | 103 | 152 | 279 | 416 |
| NP | 12.5 | 20 | 38 | 55 |
| eps | 6.2 | 9.9 | 18.8 | 27 |
good results from canfin for q1 fy 14.
@Jatin: Bang on. Congrats! Any tips for fellow mortals like us, about how you arrive at those numbers? What do you expect for the next quarter, and FY 15?
Thanks for sharing your views with the community.
It isn’t that tough to forecast revenuesfor some industries (Auto, Banks, NBFCs).
For Canfin also, just track the Loan Book & you will be able to predict the sales number.
Margin are tougher to predict due to NPA provisioning.
Hence, I used recent few quarters margins to arrive at PAT range.
For next quarter estimates, lets wait for loan book number.
The company is growing really fast under new management & is really cheap at current prices due to PSU tag & dislike for financial stocks currently.
With little bit of market liking & continued good performance, Canfin can easily double from here.
Disclosure- Invested.
Canfin has shown excellent growth in what many consider a difficult macro environment. In fact it has probably grown fastest among all HFC companies during past 4-6 quarters.
Valuation wise it belies imagination. A fairly predictable business with good tailwinds for next few years with negligible net NPAs quoting well below the book value and available at less than or equal to 5 PE seems an absolute steal.
The fly in the ointment is the parent holding… canara bank holding 42% stake.
But the NPA and write off fears which are usually attached to PSU banks I think should not apply to Canfin although markets will continue to attach these risks without rhyme or reason. Till the time apparent sanity prevails, stock could remain range bound.
But as Jatin Kalra mentions so aptly, if the management doesnt do anything stupid, there could be some serious re rating here which could provide very very decent returns from these levels. Only thing one needs is patience and conviction.
It looks like the proverbial no brainer.
disc: invested and looking to add more on declines.
3 Likes
Dec ending quarter saw increase in everything -Branches, Employees,Sanctions, disbursements.
Loan Book now stands at 5355 crs.
While Gross NPA is at 17crs only.
http://www.canfinhomes.com/announcements/Performance%20Highlights%2031-12-13.pdf
Looks all set to do 76-78 crs for FY14 & looks dirt cheap at current levels.
Management is so important…from the time the new management has taken charge under C Ilango…there has been focus on growth and the result we can see in last 2 years the number of branches have increased and there is focus on core segments…They have realized which are the prominent focus areas where CANFIN has to focus…
Its a typical AAED to be added and a must in your portfolio
** -Branches, Employees,Sanctions, disbursements.Loan **
crs.
Link: http://www.google.com/url?q=http%3A%2F%2Fwww.canfinhomes.com%2Fannouncements%2FPerformance%2520Highlights%252031-12-13.pdf&sa=D&sntz=1&usg=AFQjCNFYFMbTuiFEcqnanSfYkWD1nxJzbQ http://www.canfinhomes.com/announcements/Performance%20Highlights%2031-12-13.pdf Link: http://www.canfinhomes.com/announcements/Performance%20Highlights%2031-12-13.pdf
Recent ER’s on Canfin