CAN FIN HOMES LIMITED Result Update (PARENT BASIS): Q3 FY15 BUY CMP 625.10 Target Price 731.00 JANUARY 28th 2015 ISIN: INE477A01012 Index Details SYNOPSIS Stock Data Sector BSE Code Face Value 52wk. High / Low (Rs.) Volume (2wk. Avg. Q.) Market Cap (Rs. in mn.) Can Fin Homes Ltd (CFHL) focus on individual loan segment, which has a high growth potential, extend its business operations in potential places and on non-housing loans. Housing Finance 511196 10.00 665.17/147.04 86000 12805.17 Revenue of the company registered 41.98% increase and stood at a record of Rs. 2155.23 million for Q3 FY15 against Rs. 1517.97 million for the prior period Last year. Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A Net Sales EBITDA Net Profit EPS P/E 5780.04 5316.53 757.12 36.96 16.91 FY15E FY16E 8175.67 7572.49 904.21 44.14 14.16 10056.08 9342.10 1038.64 50.70 12.33 Net profit stood at Rs. 259.50 million against Rs. 203.49 million in the corresponding quarter ending of previous year. An increase of 27.52% yo-y. In Q3 FY15, Earnings before Interest, Dep and Tax was at Rs. 2010.19 million and against Rs. 1407.75 million in Q3 FY14. An increase of 38.42% y-o-y. Shareholding Pattern (%) As on 31st Dec 2014, Company sanctions and disbursements stood at Rs. 9161.90 million and Rs. 8525.20 million respectively. In the nine months ended of FY15, the company registered a growth of 41.71% in Net sales to Rs. 5899.75 million from Rs. 4163.36 million in the nine months ended of FY14. 1 Year Comparative Graph Loan book and Borrowings of the company stood at Rs.76340.00 million and Rs. 70330.00 million respectively as on 31st Dec, 2014. Can Fin Homes has a network of 106 branches & 8 Satellite Offices across 19 states as on 31st Dec, 2014. Net Sales and PAT of the company are expected to grow at a CAGR of 37% and 24% over 2013 to 2016E respectively. CAN FIN HOMES LIMITED BSE SENSEX PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) 625.10 670.95 483.00 485.65 12805.17 41834.30 62138.20 245089.60 36.96 18.63 46.65 27.31 16.91 36.01 10.35 17.78 2.83 5.64 1.74 3.25 65.00 12.00 80.00 225.00 Can Fin Homes Ltd Repco Home Finance Ltd Dewan Housing Finance Ltd LIC Housing Finance Ltd Analysis & Recommendation - ‘BUY’ For the quarter ended 31st Dec 2014, Can Fin Homes Ltd reported its net sales of Rs. 2155.23 million against Rs. 1517.97 million in previous year period, which represents growth of 41.98%. For Q3 FY15, EBIDTA was Rs. 2010.19 million, an increase of 42.79% against Rs. 1407.75 million in Q3 FY14. The company earned profit after tax of Rs. 259.50 million against Rs. 203.49 million in corresponding quarter of previous year. Profit before Tax (PBT) at Rs. 399.87 million in Q3 FY15 as against Rs. 288.89 million in Q3 FY14, registered a growth of 38.42% yo-y. With a view to sustain and enhance its performance level, Company is offering a range of housing as well as non-housing products, with more emphasis on marketing and customer oriented business relationship. In the nine months ended of FY15, the company registered a growth of 41.71% in Net sales to Rs. 5899.75 million from Rs. 4163.36 million in the nine months ended of FY14. Net profit grew by 13.95% to Rs 633.56 million for the end of 9M FY15 from Rs 556.00 million for the end of 9M FY14. The company’s operating profit or EBIDTA grew by 42.87% of Rs. 5435.40 million for the 9 months end of FY15 compared to Rs. 3804.56 million for the 9 months end of FY14. As on 31st Dec 2014, Company sanctions and disbursements stood at Rs. 9161.90 million and Rs. 8525.20 million respectively. Loan book and Borrowings of the company stood at Rs.76340.00 million and Rs. 70330.00 million respectively as on 31st Dec 2014. Net worth of the company stands at Rs. 5160.00 million as on 31st Dec 2014. The Indian economy is one of the fastest growing economies in the world and the GDP growth is expected to improve further in 2014-15. The real estate sector witnessed a good growth in the last few years. The demand for commercial property is being driven by the economic growth of the Country. As such, a sharp increase in demand for residential units and also commercial real estate are foreseen. Can Fin Homes Ltd expects to maintain a sustained growth in its performance levels during 2014-15 and has put in place a well-drawn vision document. However, given the indications about the likely changes in cost of funds and expectations of borrowers for availing loans at lesser rates, the margins are expected to continue to be under pressure. The Company would continue to give a more focused attention for lending to individual loan segment, project loans and non-housing loans with an emphasis to further enhance its market share in the housing market segment. Over FY2013-16E, we expect the company to post a CAGR of 37% and 24% in its top-line and bottomline respectively. Hence, we recommend ‘BUY’ for ‘CAN FIN HOMES LTD’ with a target price of Rs.731.00 for medium to long term investment. QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY15, Can Fin Homes Ltd’s main business is to provide Months Dec-14 Dec-13 % Change Net Sales 2155.23 1517.97 41.98 Housing Loans and reported its financial results for PAT 259.50 203.49 27.52 the quarter ended 31st Dec, 2014. EPS 12.67 9.93 27.52 2010.19 1407.75 42.79 loans for the purchase and construction of residential houses, 88% of loans are retail Individual EBITDA The company has achieved a turnover of Rs. 2155.23 million for the 3rd quarter of the financial year 2015 as against Rs. 1517.97 million in the corresponding quarter of the previous year. In Q3 FY15, EBITDA stood at Rs. 2010.19 million and increase of 42.79% against the prior period previous year. In Q3 FY15, net profit of Rs. 259.50 million against Rs. 203.49 million in Q3 FY14. The company has reported an EPS of Rs. 12.67 for the 3rd quarter as against an EPS of Rs. 9.93 in the corresponding quarter of the previous year. Break up of Expenditure During Q3 FY15, total Expenditure rose up by 36% per cent mainly on account of employee benefits expenses by 33% to Rs. 62.10 million against Rs.46.56 million in Q3 FY14. In Q3 FY15 other Expenses stood at Rs. 82.93 million against Rs. 63.66 million in Q3 FY14. Whereas Depreciation and amortization by 162% to Rs. 9.99 million in 3rd quarter of FY15 from Rs. 3.81 million over the Corresponding quarter of previous year. Total expenditure in Q3 FY15 stood to Rs. 155.03 million as against Rs. 114.03 million in Q3 FY14. COMPANY PROFILE Can Fin Homes established in the year 1987, and is promoted by Canara Bank in association with reputed financial institutions including HDFC and UTI. The relevance of having an exclusive outfit for providing housing finance at a time when institutional finance was not flowing to the housing sector to the required extent and banks had constraints in locking up funds in long term housing finance saw the birth of CFHL. It was promoted in 1987, the "International Year for Shelter for the Homeless" by Canara Bank in association with reputed financial institutions including HDFC and UTI. Can Fin Homes is the first bank sponsored Housing Finance Company in India and one among the top players in the country's housing finance sector. The expertise gained by us in housing finance over the years gives us the confidence to come up to expectations. A unique personal touch in service makes us different from others. CFHL was set up with the mission of promoting home ownership and increasing housing stock all over the country. The housing finance company has a standing of over 22 years. It is one among the four HFCs selected by NHB in its first phase of securitization programme has an all-India presence with a network of 106 branches in over 19 states as on 31st Dec 2014. Business Areas Housing Loans • Loan for Rural Housing (LRH) • Housing Loan Individual • Home Loan for NRI. Non Housing Loan • Personal Loan • Site Loan • Mortgage Loan • Loan against Property • Child Education Loan. Deposit Scheme Can Fin Homes has the unique privilege of meeting the varied financial requirements of its customers, be it as a reliable home finance provider or as a competent fixed deposit accepting company. • Fixed Deposit • Cumulative Deposit • Fixed Deposit Scheme for Senior Citizen • Cumulative Deposit Scheme for Senior Citizen • Can fin Trust Fixed Deposit Scheme • Can fin Trust Cumulative Deposit Scheme. Recognitions • CFHL enjoys 5 Star rating from NHB for the purpose of refinance. • CFHL's Deposit programme enjoys 'MAA+' rating, which is the highest possible under high safety rating. Location & Branches • Chandigarh • Bhubaneswar • Chennai • Noida • Mumbai • Hosur • Gurgaon • Navi Mumbai • Mysore • New Delhi • Pune • Pondicherry • Jaipur • Hyderabad • Coimbatore • Luck now • Visakhapatnam • Calicut • Raipur • Vijayawada • Cochin • Patna • Goa • Trichy • Ahmadabad • Hubli • Trichur • Bhopal • Davangere • Madurai • Indore • Bangalore • Thiruvananthapuram. • Vadodara • Mangalore FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2013A-2016E CAN FIN HOMES LTD. FY-13A FY-14A FY-15E FY-16E a) Capital 204.88 204.88 204.88 204.88 b) Reserves and Surplus 3716.83 4318.17 5112.71 5961.42 3921.71 4523.05 5317.59 6166.30 28992.58 43287.95 48049.62 52854.59 320.01 407.59 509.49 626.67 29312.59 43695.54 48559.11 53481.26 a) Short Term Borrowings 1736.68 3658.92 11269.47 15551.87 b) Other Current Liabilities 5366.30 6731.07 7942.66 9213.49 c)Short Term Provisions 332.76 507.88 584.06 665.83 7435.74 10897.87 19796.20 25431.19 40670.04 59116.46 73672.90 85078.75 I EQUITY AND LIABILITES 1) Shareholder's Funds Sub -Total- Shareholder fund 2) Non Current Liabilities a) Long- Term Borrowings b) Long Term Provisions Sub-Total -Non - Current liabilities 3) Current Liabilities Sub-Total - Current Liabilities TOTAL-EQUITY AND LIABILITES (1 + 2 + 3) II ASSETS 1) Non- Current Assets Fixed Assets i. Tangible Assets 65.00 78.16 92.23 106.99 ii. Capital work in progress 2.94 0.00 0.00 0.00 a) Total Fixed Assets 67.94 78.16 92.23 106.99 b) Non-Current Investment 159.35 149.35 153.83 159.98 c) Deferred Tax Assets 48.75 48.65 51.08 54.15 39954.79 58306.15 72771.69 84083.94 40230.83 58582.31 73068.83 84405.06 a) Cash & Cash Equivalents 85.44 91.54 96.12 99.96 b) Short- Term Loans and Advances 349.73 438.05 503.76 569.25 4.04 4.56 4.20 4.49 439.21 534.15 604.07 673.70 40670.04 59116.46 73672.90 85078.75 d) Long Term Loans & Advances Sub -Total- Non- Current Assets 2) Current Assets c) Other Current Assets Sub -Total Current Assets TOTAL-ASSETS(1 + 2) Annual Profit & Loss Statement for the period of 2013A to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 3926.95 12m 5780.04 12m 8175.67 12m 10056.08 Other Income 0.00 0.00 0.00 0.00 Total Income 3926.95 5780.04 8175.67 10056.08 Expenditure -334.29 -463.51 -603.18 -713.98 Operating Profit 3592.66 5316.53 7572.49 9342.10 Interest -2830.11 -4227.67 -6129.61 -7662.01 Gross profit 762.55 1088.86 1442.88 1680.08 Depreciation -11.59 -20.10 -41.70 -52.12 Exceptional Items 0.00 -2.24 0.00 0.00 Profit Before Tax 750.96 1066.52 1401.19 1627.96 Tax -209.75 -309.40 -496.98 -589.32 Net Profit 541.21 757.12 904.21 1038.64 Equity capital 204.85 204.85 204.85 204.85 Reserves 3716.84 4318.17 5112.71 5961.42 Face value 10.00 10.00 10.00 10.00 EPS 26.42 36.96 44.14 50.70 Net Sales Quarterly Profit & Loss Statement for the period of 30th June, 2014 to 31st Mar, 2015E Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E Description 3m 3m 3m 3m 1760.01 1984.51 2155.23 2275.92 Other income 0.00 0.00 0.00 0.00 Total Income 1760.01 1984.51 2155.23 2275.92 Expenditure -128.22 -191.09 -145.04 -138.83 Operating profit 1631.79 1793.42 2010.19 2137.09 Interest -1335.98 -1490.55 -1600.33 -1702.75 Gross profit 295.81 302.87 409.86 434.34 Depreciation -4.83 -12.14 -9.99 -14.74 Profit Before Tax 290.98 290.73 399.87 419.61 Tax -101.40 -106.25 -140.37 -148.96 Net Profit 189.58 184.48 259.50 270.65 Equity capital 204.85 204.85 204.85 204.85 Face value 10.00 10.00 10.00 10.00 EPS 9.25 9.01 12.67 13.21 Net sales Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 26.42 36.96 44.14 50.70 EBITDA Margin (%) 91.49 91.98 92.62 92.90 PBT Margin (%) 19.12 18.45 17.14 16.19 PAT Margin (%) 13.78 13.10 11.06 10.33 P/E Ratio (x) 23.66 16.91 14.16 12.33 ROE (%) 13.80 16.74 17.00 16.84 ROCE (%) 10.40 10.37 11.78 12.60 Debt Equity Ratio 7.84 10.38 11.16 11.09 EV/EBITDA (x) 12.09 11.22 9.51 8.68 Book Value (Rs.) 191.44 220.80 259.58 301.01 3.27 2.83 2.41 2.08 P/BV Charts OUTLOOK AND CONCLUSION At the current market price of Rs. 625.10, the stock P/E ratio is at 14.16 x FY15E and 12.33 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.44.14 and Rs.50.70 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 37% and 24% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 9.51 x for FY15E and 8.68 x for FY16E. Price to Book Value of the stock is expected to be at 2.41 x and 2.08 x respectively for FY15E and FY16E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.731.00 for Medium to Long term investment. INDUSTRY OVERVIEW India’s financial services sector is diversifying and growing at a good rate. The sector is bank dominated with commercial banks holding over 60 per cent of the total assets. The sector comprises commercial banks, insurance firms, cooperatives, non-banking institutions, mutual funds, pension funds and other financial entities. Housing Industry During the current year, the RBI and Government have a stated Policy of managing inflation, promoting investment through generation of employment and income. The Country’s economy was moving forward at a snail’s pace during the financial year 2013-14 facing a sluggish macroeconomic situation. The income growth slowed down, the rupee weakened continuously, inflation touched double digits and borrowing cost increased during the financial year. Due to these reasons it was evident that the consumer confidence was affected to a large extent and there was reluctance to invest. Though the overall prices of residential properties in the Country continued to display an upward movement, there was sluggish/downward trend in some parts of the country. In this scenario, the Country’s real estate sector undoubtedly needed a fresh blend of progressive reforms to boost up confidence amongst home buyers as well as investors. Major reforms in the form of Real Estate Regulatory Bill and the land Acquisition, Resettlement and Rehabilitation Bills were initiated in the Parliament in the middle of the financial year gone by. As on date, shortage of houses in India stands at 19 million units and a major portion of this housing shortage is in the economically weaker sections and low income group categories. This demand is continuing to increase, clearly indicating that there is a vast scope for development of affordable housing in the Country. The housing loan/mortgage market in India constitutes 9% of the GDP. This is one of the lowest when compared to some other emerging Asian economies like Malaysia, Thailand and China. In developed economies like Switzerland, Netherlands and Denmark, this percentage is still higher. Deeper penetration of banks and financial institutions into more urban and rural areas by way of opening branches and introduction of innovative affordable housing loan products would help to develop the loan/mortgage market in the Country further. Considering the importance of the housing sector as a major player towards generation of employment & income and its contribution towards the GDP, policy based efforts are also being initiated to encourage and make the sector more transparent. With the ever increasing demand for housing in the urban as well as in rural areas, almost all banks and financial institutions have been vigorously active in the arena to grab a bigger share of the market. It is needless to say that the housing finance sector definitely shows signs of having a brilliant future in the years to come due to reasons like increase in double income earning families, availability of more disposable income in the hands of the individual and improved living standards, increase in population, urbanisation, fiscal incentives provided by the government, younger generation’s wish for acquiring homes very early in life, the emergence and continuation of nuclear family set up, shortage in supply of houses to meet the ever growing demand, easy availability of finance/loans for acquiring houses, increase in rental income for residential units etc,. OUTLOOK FOR 2014-15 Urbanisation and growing household income are a few factors influencing the demand for residential accommodation and growth in the retail sector. The demand for rural housing is also on the increase. As such, a sharp increase in demand for residential units and also commercial real estate are foreseen. The Indian economy is one of the fastest growing economies in the world and the GDP growth is expected to improve further in 2014-15. The real estate sector witnessed a good growth in the last few years. The demand for commercial property is being driven by the economic growth of the Country. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document. Firstcall India Equity Research: Email – [email protected] C.V.S.L.Kameswari U. Janaki Rao B. Anil Kumar M. Vinayak Rao G. Amarender Pharma & Diversified Capital Goods Auto, IT & FMCG Diversified Diversified Firstcall Research Provides Industry Research on all the Sectors and Equity Research on Major Companies forming part of Listed and Unlisted Segments For Further Details Contact: Tel.: 022-2527 2510/2527 6077 / 25276089 Telefax: 022-25276089 040-20000235 /20000233 E-mail: [email protected] www.firstcallresearch.com