Can Fin Homes Ltd (Can Fin) is a south based (74% of business) housing finance
company with 43.53% shareholdings owned by Canara Bank. Can Fin has maintained
a low-risk profile loan book, predominantly focused on salaried class. We expect Can Fin to deliver RoE of more than 20% on a
sustained basis from FY2017 onwards (FY2017-23.6%, FY2018E-24.1%, and
FY2019E-25.6%) on the back of higher growth, NIM expansion and stable credit
cost. Additionally, cost optimization should also add to return ratio. At the current
market price, the stock is trading at 2.85x its FY2019E BV of `608. We recommend
a BUY rating on the stock with a target price of Rs2,128 (3.5x FY2019E BV).
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