Can Fin Homes a 'Buy' post Q2 results beat? Here are target prices

Can Fin Homes reported a stronger-than-expected performance in the September quarter, with earnings beat driven largely by strong net interest income (NII) and lower credit costs. Loan growth remained subdued despite a 26 per cent sequential rise in disbursements, as elevated balance transfer outflows led to higher repayments. Asset quality showed improvement, resulting in benign credit costs, while reported NIM expanded 20 basis points (bps), aided by a sharp decline in the cost of borrowings. Net-net, analysts are neutral to positive on Can Fin Homes shares.

MOFSL said while disbursements momentum strengthened in 2Q, the ongoing IT transformation may temporarily disrupt disbursement activity in 3QFY26, potentially keeping loan growth muted in the near term. The brokerage said Can Fin Homes is a robust franchise with strong moats on the liability side. But it would await execution on its loan growth guidance, and 2) clarity on potential disruptions (if any) from the tech transformation the company is set to undertake this calendar year, before turning constructive on the stock. It reiterated its 'Neutral' rating with a target of Rs 915.

For the September quarter, NII, pre-provision operating profit (PPOP) and profit after tax (PAT) exceeded according to Nirmal Bang Institutional Equities' estimates by 13.2 per cent, 9.7 per cent and 13.9 per cent, respectively. Nirmal Bang reiterated its ‘Buy’ rating and raised its target price on Can Fin Homes to Rs 1,000 from Rs 950 earlier, valuing the housing finance company at 1.8 times September 2027 estimated adjusted book value (ABV), an 11.3 per cent discount to its five-year average multiple of 2 times.

Nirmal Bang anticipated a loan growth compound annual growth rate (CAGR) of 14.5 per cent and an earnings CAGR of 15.5 per cent over FY25–FY28, resulting in projected RoA/RoE of 2.3 per cent and 17.6 per cent, respectively, in FY28. The brokerage expects FY26 NIM to average 3.7 per cent, supported by lower cost of funds in the second half. While operating expenses may stay elevated due to ongoing investments and expansion, Nirmal Bang believes Can Fin Homes remains well-positioned to sustain healthy growth and profitability over the medium term

Nirmal Bang noted that Can Fin Homes’ net profit rose 19 per cent year-on-year (YoY) and 12 per cent sequentially, driven by a decline in provisions. NII increased 19 per cent YoY and 12 per cent quarter-on-quarter (QoQ). Net interest margin (NIM) improved by 27 basis points (bps) YoY and 38 bps QoQ to 4.02 per cent, supported by a 100 bps decline in borrowing costs across bank borrowings and the repricing of a large term loan during July–August.

Cost of borrowings (CoB) fell 39 bps YoY and 30 bps QoQ to 7.17 per cent, leading to a spread improvement to 2.91 per cent (versus 2.62 per cent in Q1FY26 and 2.56 per cent in Q2FY25).

The management expects NIMs to sustain around 3.75 per cent and spreads near 2.75 per cent, aided by additional funding benefits, including Rs 1,500 crore of fresh sanctions from the National Housing Bank (NHB) at a blended cost of 6.8 per cent, Nirmal Bang said.

PPOP grew 16 per cent YoY and 10 per cent QoQ to Rs 3.3 billion, while operating expenses rose 28 per cent YoY and 12 per cent QoQ to Rs 76.20 crore, reflecting continued investments in information technology, business transformation, and in-house sales expansion. Return ratios remained robust with return on assets (RoA) at 2.46 per cent and return on equity (RoE) at 18.41 per cent. The capital adequacy ratio (CRAR) stood at 25.58 per cent.

As per Nirmal Bang, the loan book for Can Fin Homes expanded 8 per cent YoY and 1 per cent QoQ, with housing loans (including commercial real estate) accounting for 85 per cent of the portfolio. The salaried and professional segment contributed 69 per cent of total loans. Disbursements rose 7 per cent YoY and 26 per cent QoQ, led by a strong rebound in Karnataka—where operational challenges have been largely resolved—and improving traction in Telangana, which is expected to strengthen further by Q4FY26.

Regionally, northern and eastern markets grew around 30 per cent YoY, while Tamil Nadu and western India registered growth of around 25 per cent. The average ticket size of new housing loans stood at Rs 25 lakh.

Asset quality showed marginal improvement, with gross non-performing assets (GNPA) and net non-performing assets (NNPA) ratios at 0.94 per cent and 0.48 per cent, respectively, compared with 0.98 per cent and 0.54 per cent in Q1FY26. The delinquency pool reduced to 9.58 per cent from 10.26 per cent in the previous quarter, while the provision coverage ratio (PCR) remained stable at 46.4 per cent.