India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

<ul class="">
<li>
<a href="https://www.smartkarma.com/entities/17447" target="_blank" data-smartkarma-citation="entities:17447:1">Can Fin Homes (CANF IN)</a> reported 2QFY19 PAT in line with our estimates. Disbursements grew by 7% against our estimates of 12%. Loan book grew at 17% against our estimates of 18%.</li>
<li>Asset quality improved slightly on a sequential basis. Reported GNPA and NNPA were higher than our estimates.</li>
<li>Interest rate spread was  2.16% against our estimates of 2.33%, which is the lowest compared to the last 8 quarters. We expect interest rate spread to expand going forward as interest income yield is likely to expand due to 55bps hike in MCLR rates from October 2018. Interest rate spread in 2QFY19 is 2.16% and we expect it to expand by 49bps to 2.65% in FY20E.</li>
<li>Reported Net Interest Margins (NIMs) were 3.17%, which are the lowest compared to last 8 quarters. We expect NIMs to expand due to hike in MCLR rates in October 2018.</li>
<li>We expect disbursements and loan book to grow at CAGR 15% and 19%(FY18-20E) respectively. We expect NII and PAT to grow at CAGR 20.3% and 20.0% (FY18-20E) respectively.</li>
</ul>
<ul class="">
<li>We have revised our price to book multiple from 2.5x to 2.6x based on FY20E ROE of 24.2% (21.3% according to our previous estimates). We have assigned a P/B multiple of 2.6x to adjusted book value for September 20E of Rs. 162 per share to arrive at a fair value of Rs.425 for next 12 months.</li>
</ul>
<table class="table table-striped">
<tbody>
<tr>
<td>Particulars </td>
<td style="text-align: right;">FY17</td>
<td style="text-align: right;">FY18</td>
<td style="text-align: right;">FY19E</td>
<td style="text-align: right;">FY20E</td>
</tr>
<tr>
<td>Adjusted book value (ABV) Rs</td>
<td style="text-align: right;">80.9</td>
<td style="text-align: right;">98.8</td>
<td style="text-align: right;">115.2</td>
<td style="text-align: right;">143.4</td>
</tr>
<tr>
<td>P/ABV (x)</td>
<td style="text-align: right;">3.1</td>
<td style="text-align: right;">2.6</td>
<td style="text-align: right;">2.2</td>
<td style="text-align: right;">1.8</td>
</tr>
<tr>
<td>RoE</td>
<td style="text-align: right;">24.1%</td>
<td style="text-align: right;">24.9%</td>
<td style="text-align: right;">22.4%</td>
<td style="text-align: right;">24.2%</td>
</tr>
<tr>
<td>RoA</td>
<td style="text-align: right;">1.9%</td>
<td style="text-align: right;">2.1%</td>
<td style="text-align: right;">1.9%</td>
<td style="text-align: right;">2.1%</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source- CANF 2QFY19 Result, Trivikram Consultants Research as on 26/10/2018</div>



Can Fin Homes (CANF IN) reported 2QFY19 PAT in line with our estimates. Disbursements grew by 7% against our estimates of 12%. Loan book grew at 17% against our estimates of 18%.
Asset quality improved slightly on a sequential basis. Reported GNPA and NNPA were higher than our estimates.
Interest rate spread was  2.16% against our estimates of 2.33%, which is the lowest compared to the last 8 quarters. We expect interest rate spread to expand going forward as interest income yield is likely to expand due to 55bps hike in MCLR rates from October 2018. Interest rate spread in 2QFY19 is 2.16% and we expect it to expand by 49bps to 2.65% in FY20E.
Reported Net Interest Margins (NIMs) were 3.17%, which are the lowest compared to last 8 quarters. We expect NIMs to expand due to hike in MCLR rates in October 2018.
We expect disbursements and loan book to grow at CAGR 15% and 19%(FY18-20E) respectively. We expect NII and PAT to grow at CAGR 20.3% and 20.0% (FY18-20E) respectively.


We have revised our price to book multiple from 2.5x to 2.6x based on FY20E ROE of 24.2% (21.3% according to our previous estimates). We have assigned a P/B multiple of 2.6x to adjusted book value for September 20E of Rs. 162 per share to arrive at a fair value of Rs.425 for next 12 months.




Particulars 
FY17
FY18
FY19E
FY20E


Adjusted book value (ABV) Rs
80.9
98.8
115.2
143.4


P/ABV (x)
3.1
2.6
2.2
1.8


RoE
24.1%
24.9%
22.4%
24.2%


RoA
1.9%
2.1%
1.9%
2.1%



Source- CANF 2QFY19 Result, Trivikram Consultants Research as on 26/10/2018

Can Fin Homes- 2QFY19- Spreads to Improve over the Next 4 Quarters