So are we in for a Ajanta type run after results?
But why is a jobbing unit interested in T toT segment stocks?
Canfin is now out of t to t segment. circuit filter is now 10%.
Cant predict the results in case of canfin but I think there seem to be no expectations if one were to look at market price. So any positive surprise can give good upsides.
Repco has listed in a lacklustre manner today trying to hang on to its IPO price of 172.
Some fire works can happen for CAN FIN HOMES as valuepick guy recommended it recentlyâŚSome of his recommendation had given very sharp up moves in the past(short term up trends)âŚ
regards,
Shanid V H
Good number of valuepick fav like sequent/granules have taken huge hit in recent midcap/smallcap carnage, and hence doubtful about the short-term gyration after value-pick post. Besides I hate when a good stock rise too sharp, it donât let me add more at a lower price in a sip like manner, and thereby making a larger eventual gain.
Results are good.
Net sales-11309.7 compared to 10281.9(Q3-2013) and 7806.4(Q4-2012)
EPS-7.6 compared to 6.2(Q3-13) and 7.0(Q4-12) yoy- 26.4 compared to 21.4
Hi,
Canfin results are out. Overall reasonably good results.
Income has grown by 41%. Interest Exp grew by 45%
The income growth is much above the growth I had factored in for FY13 aided by higher than expected NIM. But op exp was higher than I imagined, it grew by 60% largely attributable to the branch expansion. So****EPS is at 26.4 a growth of 23%.
The Book Value per share I had projected for fy13 was 185 to 190.** It should be 192 with a dividend of Rs 4 declared for fy13.** Dividend has increased by 33% from Rs 3 last year, I had expected a dividend of Rs 3.5.
Rough calculation shows that NIM is above 3, roughly 3.2. This is a big positive.
Loan book would have grown by 45% and disbursement almost 100%.
FY14 should easily give a growth of 35-40% in EPS as mentioned earlier. The higher loan book will aid this growth. Lower interest rates leading to NIM above 3 should lead to even higher growth in EPS.
The lag effect of huge disb growth is visible. The FY12 growth was 23% in income and 5% in EPS. The same has picked up in FY13 to 41% and 23% respectively. The real growth in these 2 parameters should come by in FY14. Downward revision of interest rate will be an icing on the cake.
Key monitorable - further branch expansion and management talk on expansion.
Expected Book Value per share for FY14 - Rs 225.
Cheers
Vinod MS
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thanks vinod ms for the lucid summary of the results and implications for next year.
pre tax profits for the march qtr has been excellent at 24 cr up in q4 fy 13 from 18.3 cr in q4 fy 12.
What has played spoilsport is the higher tax of 8.4 cr in q4 fy 13 against 3.95 cr in q4 fy 12.
Overall results seem to be quite good and as vinod explained fy 14 could be a great year and if interest rates reduce then it would be the icing on the cake.
Thanks for the result update Vinod and Hitesh. Dividend at Rs. 4/- is a definite plus. Itâs still available at a good bargain price. Will be waiting for the AR to read on what management has to say about future plans.
Disc: I have been buying for sometime now.
Housing finance companies are reporting good numbersâŚbut there are enough reports about a slowdown in the housing market. Isnât there a disconnect in this somewhere? Can someone with familiarity in the housing market explain this?
)- HG
Our dear venerable Tulsian-ji recommended canFin as his multibagger with a target of 190.
Hi,
The performance highlights have been updated in Canfin website. Details below
| FY12 | FY13 | Growth | |
| Sanctions | 1105 | 2093 | 89% |
| Disbursements | 859 | 1814 | 111% |
| Outstanding Book | 2679 | 4016 | 50% |
| PBT | 60.98 | 75.1 | 23% |
| PAT | 43.76 | 54.12 | 24% |
| Gross NPA | 19.01 | 15.66 | -17% |
| Net NPA | 0 | 0 | - |
| Brnaches | 52 | 69 | 33% |
Gross NPA is less than 0.5%, very impressive and expected to further slide as loan book grows at faster clip.
The new branches wouldn't have contributed to sales much as it takes time for new team to tap the addressable market. So growth will continue from them in the coming days.
The last 2 years' growth would have been primarily driven by appointment of DSAs which the com was not doing earlier. This is very critical to sales as now a days nobody would want to visit the bank/nbfc multiple times to submit documents and process their loan. Sales team will pitch camp at builders sites and offices and hold marketing activities too.
The new branches will ensure sales growth in FY14 and FY15 with their relationships in the locality growing.
Cheers
Vinod
Yes, good nos indeed and it looks good.
One question is that if we look at the housing finance space, then generally all the cos are getting low PE despite regular 20-25% growth and big brand establishment. Anything that we need to understand more while researching here?
Ayush
There is scope for PE expansion in some of these HF companies like gic and canfin. dewan has the tag of questionable promoter integrity attached to it.
Mainly I think the re rating if and when it happens will happen taking into account the companyâs ROE, ROA and div payout besides asset quality.
GIC scores in the div payout category. canfin needs to ramp up its ROE and ROAs. If they start milking their geographical advantage of being dominantly in and around bangalore where real estate growth is high. Plus the newly set up offices start to need contributing seriously.
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Dear Ayush, some links on housing bubble
1.http://www.indianexpress.com/news/housing-bubble-can-burst-govt/1024681/0
2.http://www.globalpropertyguide.com/Asia/Indi/Price-History
For the kind of growth that is expected on this stock, there is a niggling issue of CAR (Capital Adequacy ratio). For FY13, it is around 13.8 according to the HDFC Sec report.
I tried to calculate it for Canfin homes, but the calculations are complex and not for us mere mortals (and to tell the truth, one would require far more granular information than just the balance sheet to come up with the CAR figure). I think since HDFC Sec report (http://www.hdfcsec.com/research/ResearchDetails.aspx?report_id=2990173) predicted the BV, EPS etc., to the dot for FY13, letâs assume they have got the CAR right too. So, CAR for FY13 is 13.8.
So, given they have to maintain CAR of 12% atleast, it beats me why they raised the dividend by 33% over the previous year. In fact, prudence or rather if they were expecting a lot of growth in disbursements (and loan book) in the next year, dividend should have been same or just a nominal increase. So, the 33% increase logic eludes me, unlessâŚ
UnlessâŚthe management is expecting a lot of repayments to come in and no exponential growth to happen. In fact, this sharekhan report (http://smartinvestor.business-standard.com/BSCMS/PDF/can_fin_041212.pdf) (great report) does say that CAR will 12% by FY14.
So, rough calculations -
CAR is currently 13.8. So, 1.8% of leeway here and say 1-1.5% due to repayments. That is roughly 3% left.
CAR FY12 had 17.4%. And FY13 is 13.8%. That is roughly 4% for roughly 1400 cr increase in loan book. For 3%, it would be roughly 1000 cr. That is Loan Book at the end of FY14 will be around Rs.5000 cr. and not Rs.5800 cr (like in the excel sheet).
This 5000 cr is obviously a back-of-the-napkin calculations and should not be taken as gospel truth.
Btw, they are looking to open 5 branches right away -http://www.canfinhomes.com/premises/PREMISES%20WANTED%20-%205%20Locations%20(2).pdf)- so, I really donât know where the capital is going to come from for all this expected growth 
There are multiple instruments to raise CAR - Rights issue/QIP/Debt/Perpetual debt etc⌠But again, at what cost are you going to raise those instruments at? For eg., currently the avg. cost of capital of Canfin is around 8.8-9.2 and they lend it out at this + 3%. If the perpetual debt instrument/ECB etc., is raised at say 10,11 or 12%, then you canât charge 10,11,12 +3% because the competition will not allow you to. Ergo, your net interest margins are going to take a hit. (Debt mutual funds also can take exposure in such debt paper by HFCs according to recent RBI guidelines)
However, the flip side is this. Maybe, just maybe the quantum of debt that will be raised as tier-2 capital and the interest that gets paid out will not effect the overall profits by much. Estimated book value at FY14 is supposed to be 226 per share. If I assume they are going to raise debt of 800 cr at 11%âŚbut the rest will be at say 8%, then the net effect is pretty lowâŚand book value might be in the range of 205-215, instead of Rs.226.
Anyway, that should not take us away from the main story - which is - the stock is still undervalued (my guess is around 30-40% levels) and we can deal with all these calculations and headache after the undervaluation is done. By then, I guess weâll also see Q1FY14 results.
P.S: And yes,Canfin homes may also correct due to the parent hangover (Canara Bank). That of course doesnât imply that we shouldnât invest. It only implies that we need to be aware of the position size we take in Canfin.
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CanFin Homes (Sharekhan)**
**
Recommendation: Buy
Price target: Rs220
Current market price: Rs157
Strong growth in advances to continue
Result highlights
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CanFin Homesâ Q4FY2013 results were in line with our estimate as the net profit grew by 8.4% year on year (YoY) to Rs15.5 crore. The operating performance remained strong, though the higher operating expense (opex) and tax rates had some impact on the Q4FY2013 profit. For FY2013, the company made a profit of Rs54.12 crore (up 23.5% YoY).
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The lnet interest income (NII) registered a growth of 38.7% YoY to Rs31.5 crore. This was mainly driven by a strong growth in advances.
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The loan book grew by 49.9% YoY (11.7% quarter on quarter [QoQ]) driven by 111.2% growth in the disbursements. During the quarter, the sanctions showed a robust growth of 40% QoQ (89.3% YoY). The management targets to grow its loan book by 37.0% in FY2014 to Rs5,500 crore.
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The opex was high, though lower than Q3FY2013, due to addition of new branches and manpower during the year. There was a provision reversal of Rs1.38 crore from non-performing asset in Q4FY2013. The company also provided Rs3 crore towards standard asset provision in Q4FY2013.
**Valuations and outlook
**During Q4FY2013, the CanFin Homesâ operational performance remained strong as the NII growth was robust. The company has added 17 branches in FY2013 and will add another 10-12 branches in FY2014, which will drive the growth in advances and will soften the cost/income ratio. Also, the companyâs sanctions have grown at 89.4% in FY2013 whereas the home loan demand remains buoyant (in the southern regions), which should lead to a strong growth in loans. We expect CanFin Homesâ earnings to grow at a compounded annual growth rate (CAGR) of 25.0% over FY2013-15 leading to a return on equity (RoE) of 17.2%. Further, the company has announced attractive dividend of Rs4 per share (dividend yield 2.5%), which makes the stock attractive. We maintain our Buy recommendation on the stock with a price target of Rs220.
GSR, thank you for the report.
Great to know that the management is targeting 5500 cr loan book by end of FY14 and another 10-12 branches. Would have been great if they could do a press conference or con-call and state their intentions clearly.
Rerating after some RBI rate cuts would be a likely scenario.
Cheers
Vinod
GSR, can you mail me the report at getvinodmsATgmail
Hi Vinod,
Sent email.
**
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Regards
Hi Kiran,
Thanks for the pointers and throwing caution on the easy forward projections in our excel sheets
@vinod - any thoughts on the above? If the co will need to dilute equity by way of right etc, it may cap upsides.
Ayush