Can Fin Homes shares slide on higher provisioning, muted disbursements; what should investors do?

According to the brokerage, Can Fin Homes’ PAT was largely in line with its estimates, while NIM remained strong though disbursements were muted.

The brokerage also pointed out that provisions at Can Fin Homes were higher than its estimates, while loan growth, at 13 per cent, was weak and disbursements fell 7.0 per cent sequentially.

Can Fin Homes shares faced selling pressure on Tuesday, extending losses to a second straight session, after the NBFC reported a mixed bag of quarterly financial results. The NBFC stock fell by as much as Rs 27.4, or 3.6 per cent, to Rs 741.5 apiece on BSE, after falling 3.1 per cent in the previous session.

During market hours on Saturday, Can Fin Homes reported a year-on-year increase of 32.1 per cent in net profit to Rs 200.1 crore for the October-December period. Its income from operations grew to Rs 901.9 crore for the fiscal third quarter, from Rs 709.7 crore a year ago, according to a regulatory filing.

The company’s net interest margin (NIM), a key measure of profitability, improved by 12 basis points sequentially to a seven-quarter high of 3.92 per cent.

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Its asset quality, however, deteriorated, as reflected in its gross non-performing assets (NPAs) as a percentage of total loans at 0.92 per cent for the December quarter, as against 0.76 per cent three months ago. Its net non-performing assets also increase, to 0.49 per cent from 0.43 per cent.

What brokerages make of Can Fin Home after the company’s Q3 results?

Many foreign brokerages remained upbeat on the stock after the company’s earnings announcement. Jefferies maintained its ‘buy’ call on Can Fin Homes with a target price of Rs 970 apiece, suggesting an upside of more than 26 per cent from its previous close. While the financier’s net profit was four per cent below the brokerage’s estimates, its net interest income was in line with its expectations. The brokerage also pointed out that provisions at Can Fin Homes were higher than its estimates, while loan growth, at 13 per cent, was weak and disbursements fell 7.0 per cent sequentially.

Morgan Stanley maintained its ‘overweight’ rating on Can Fin Homes with a target of Rs 1,000 apiece (30 per cent upside). According to the brokerage, Can Fin Homes’ PAT was largely in line with its estimates, while NIM remained strong though disbursements were muted. Its restructured gross non-performing assets (GNPA) within guidance and core GNPA increase were seasonal, according to Morgan Stanley.