Can Fin Homes & other updates

Can Fin Homes (BSE: 511196, NSE: CANFINHOME) is a housing finance company promoted by Canara Bank (having 42% stake). Housing Finance has been a very rewarding sector in past (look at HDFC, LIC Housing and GRUH Finance). Thus the discussion on Can Fin caught our immediate attention.

Can Fin focuses on affordable individual home loans and is concentrated in the southern India. Until 2011, the company had been growing at a marginal pace of around 7%. The Silver Jubilee year and the change in management seems to have brought about a new enthusiasm though. Since then the business has been growing at a rapid pace of about 30% p.a.

Details 2011 2012 2013
Disbursements 472 859 1814
Loan Book 2207 2674 4016
Branches 40 52 69
Gross NPA 23.47 crore 19.01 crore 15.66 crore
Gross NPA % 1.06% 0.71% 0.39%
Net NPA 0 0

Looking at the support by the government towards cheaper financing for affordable housing, there seems to be good growth opportunity ahead.

Financial Snapshot (detailed financials on Screener):

At CMP of about 153, the company is trading at a market capitalization of just 315 Cr, while having a good loan book of 4000 Cr and gross NPA of just 0.40%. Stock is trading at 6 times earning with a price to book value of 0.80.

Concerns: 1. We are cautious on the real estate sector as there has been exponential growth over last few years. Hence quality of loan book remains a key monitor here. 2. Being a PSU company, it may lack aggression if there is a management change.

Other Updates

Ajanta Pharma: The company has done superbly and so has the stock price. The stock has been one of the best performer of 2013 and the price has almost doubled in less than 5 months. Though the undervaluation available earlier has gone away and stock has got its due re-rating, it still seems to have some potential. [Earlier post on Ajanta].

Caplin Point: One of our readers, Bhushan, pointed out some negative feedback on the company. Looking at the other opportunities in the market, we have decided to exit.

Apcotex: The company has delivered decent results. Though the margins were under pressure but the company has maintained liberal dividend and increased the same to Rs.9 per share. Given the expansion plans going forward, it seems to be a good stock to remain invested.

Accelya Kale Solutions: We had mentioned about this company recently. The company declared very good Q3 results and has also declared a generous interim dividend of Rs.30 per share.

New Ideas

VST Tillers – VST is one of largest seller of power tillers in India and with a good market share and brand name. Power tiller is a compact farm mechanization tool quite commonly used in small farm lands. It’s quite useful as it is cheap and there is strong subsidy support of about 50-60% of the total cost of the tiller by the government. The company is also into tractors and is trying to scale up in this area.

VST has had a very good past track record with a consistent compounded growth of about 25% in turnover and profitability over a long period. However, in recent times the performance got affected due to some subsidy delays. It seems the problems have been solved and the company would be back to normal. The stock is available at attractive valuations of 6 times earnings and a price to book value of about 1.2.

AstraZeneca Pharma India – The parent Sweden company, AstraZeneca, is a $40 billion pharmaceutical player known for top of the line product profile. Many of its products are the best in their area with patent protections. The Indian subsidiary used to do very well untill about 2011. Then they got into several problems and they undertook a voluntary revamp of production facilities. Several of their product supplies got affected due to this, and the company started posting losses (the stock too tumbled from 2000 levels to 800 level). Based on the recent developments, it seems the company has completed the correction procedure and would be soon be back to business as usual. As per yesterday’s announcement, the parent company has provided a voluntary non-repayable financial grant of Rs.119-140 Cr to the Indian company. This is a rare move and shows their commitment towards their Indian operations. Stock seems interesting for long term investing.

We invite the views of our readers through comments.

  • Raja

    Thanks Ayush,

    About Astrazenca, are you comfortable with the valuation given their growth potential in mid-teens ?

    Regards
    Raja

    • Ayush

      Hi Raja,

      Based on the recent announcement of the co, it seems that the problems would be soon rectified + the co’s new plant would also start. If all these things happen, we expect the performance to be better than 2011 levels and hence current valuations are interesting.

      • Praful Kumar

        promoter share is 90% so to comply by 75% rule are they doing this ? have u seen a ppt for a turn around plan ?also given the fact we have Pfizers of the world here which are still unable to build a mktcap and sunpharma at 90000crs+!

        • Ayush

          Yeah, they are going to dilute the holding to 75%

  • Varun

    Do you think Caplin still manufactures counterfeit drugs?

    • Ayush

      No idea…can’t say

  • Has increased dividend from Canfin homes resulting lowering of capital adequacy ratio n as such derating of the company? Any other concerns ?

    • Ayush

      Dividend can’t majorly change the CAR. The concerns seem to be that its sort of a PSU and hence sustainability of recent growth.

  • Pl start a new thread on Accelya .this co has already achieved notable success in the sticky non linear n outcome based model which other IT cos are now striving to achieve.size of opportunity, ethical MNC promoter , 15 year thump rule, accelya mktg strength coupled with technical strength of Kale products n superb return ratio makes it a top pick specially on declines.

    • Ayush

      Yes, Accelya has done really well and with the strong dividend payout policy, they are getting the due re-rating

      • Raja

        Hi Ayush,

        I read this in the notes to accounts for last qtrly results.

        point no. 4. The company is in the process of transitioning out one of it’s significant customers since the contractual agreement with the customer is expected to end in FY13-14.

        I guess there are no more details available on this. You know of any details on this one ?

        Agree with Vivek, this one deserves a thread of it’s own.

        Regards

        Raja

        • Ayush

          Hi Raja,

          Yes, this is a concerning point and must be looked into. Other thought is that it may be that the customer may be just transitioning from their old model to pay per use model.

          • Yes that seems to be the case .but stock is volatile with delivery % just ok

  • Bharath

    Hi Ayush,

    Any idea on AVT Natural Resources?

    • Ayush

      No, we are not tracking it closely. A couple of qtrs need to be watched, as there may be decline in margins.

  • Sreekanth

    Hi ayush do you have any updates on Medi-caps? Also do you track Aanjaney Lifecare? Both stocks score high on valuation presently

    • Ayush

      Sorry, not tracking both of them

  • Mallikarjun

    Hi Ayush. Ahlcon Parenterals is out with the results

    Net profit rose to 12.87 cr as against 5 cr during the previous year.
    Sales have grown 36.64 % to 105.62 cr as against 77.30 cr during the previous year.

    Outcome of board meeting
    1.The Board has considered for payment of final dividend only on Preferential shares amounting to Rs. 5,40,000

    2. The board has considered the proposal for the 6th Expansion project 2013.

    Ayush can you look at Indo Borax and Chemicals thread also. Sheer undervaluation is there.

    Regards
    Mallikarjun

    • Ayush

      Hi,

      Yeah, indo borax looks undervalued. We have some exposure here.

      • Mallikarjun

        thanku Ayush. Your exposure builds confidence. Ayush can indo borax be allocated a major part in the portfolio.

        • Ayush

          Don’t think indo borax deserves a high allocation, as there is not much clarity on growth prospects. Also, the business seems to be a bit cyclical with slow growth.

          • Mallikarjun

            Thanku Ayush

            Regards

  • Ankit Gupta

    Hi Ayush,

    What are your views on Orbit Exports post Q4FY13 results? Whats your take on management? Any idea why the management has issued 4,00,000 ESOPs as per the outcome of board meeting?

    • Ayush

      Hi Ankit,

      Orbit seems to have done pretty well in Q4. The way the co is expanding its margins, it will be very interesting if they can deliver growth along with the current margins.

      Need to check on ESOPs

      • Ankit Gupta

        Ya even I am pretty much impresses with the Q4 results. Although, the return ratios of the company are not as great at Mayur’s but it is very much similar to Mayur in many ways.

        What’s your view on La Opala?

        Regards,
        Ankit Gupta

        • Ayush

          Mayur is an exceptional co! Yes, orbit’s ratios are pretty good however, i would like to see better topline growth too.

          Don’t track La Opala now…feel it has run up too quickly.

  • Did u buy styrolution ABS ? How is the co?

  • Lot of OFS in the offing till June 3, which one u like. I think Bajaj Corp, Gillette, Sun TV cud be good. How is Oracle financial OFS opening today?

    • Ayush

      We are not much in the OFS. We are focussing more on the long term opportunities.

  • Have u bought Repco ? What’s your take on the co n the sector specially the segment.

    • Praful Kumar

      Great story, niche player. compounding plus re-rating. you will have to be patient.

  • Mallikarjun

    Hi Ayush

    Just came across Poddar Pigments.Nice pick:-) Its OPM are weak. Is it undervalued because of that. Going forward will it improve.

    Regards
    Mallikarjun

    • Ayush

      Hi,

      As their business model is not capital intensive, its normal to have lower operating margin. It would be good if they are able OPM in the range of 8-9%

  • Pingback: Updates on latest quarterly results [Q4FY13]()

  • Anand

    Could you please share your view on IL&FS Investment managers at CMP?

    • Ayush

      Hi,

      We are not tracking it very closely but its a very interesting co and offers value at current levels.

      • Anand

        Thanks, very low liquidity on that counter though.

  • Vivek Gautam

    Spoke to someone in Canfin homes.Business is good including new branches.The C ILango MD tenure extended till March 14 as new Canara chairman RK Dubey too is a person who chases growth aggressively.Co planning to come with NCD issue to bolster cap adequacy.What impact will it have?Any updates from your side?

    • Ayush

      It will be good if the current MD continues and they keep delivering on the growth like earlier. NCD issue at low rate should help.

  • Vivek Gautam

    cud it be a case of asking Halwai how is mithai are? HDFC sec guy covering canfin are still quite positive.Have they come with an update on the co?

  • Pingback: Updates from quarterly results and AGMs | Dalal Street()

  • Jigar Punamiya

    Hi Ayush,

    With regards to VST Tillers, there is a mention about the upcoming manufacturing facility in Hosur, Tamil Nadu in their FY 13 AR. Do you know how would they tackle the issue of lack of electricity in the state.

    GRP too faces similar issue.

    Regards,
    Jigar

    • Ayush

      Few investors have asked this query but as per the response, it doesn’t seems to be a major problem for the co.

      But yes, we should seek a firm answer to it.

      • Jigar Punamiya

        Thanks for the reply Ayush.

  • Ashok Kumar Sharma

    Sir,
    I came across your blog and really liked it from the front.
    BTW, what is your take on the NHPC, the company which has stable growth and currently trading below book value and half the price offered on IPO.?

    And, Why the Banking stocks like PNB, OBC are trading below their book value?

    • Ayush

      Sir,

      Based on just valuation, they may be undervalued now after so much of correction. But over longer term, these cos are usually not the wealth creators as the cos are controlled by Govt and the policies have been very weak and many of these cos have been scam prone.

  • Vivek Gautam

    Any update on Accelya, Canfin homes, Astral Poly ?

  • Karna

    Hi Ayush,

    I have been following your blog and liked the most of the posts.

    recently you have modified the recommendation on CAN FIN HOMES, LUMAX Auto from accumulate to Hold.

    Any specific reason?

    Thanks,
    Karna.

    • Ayush

      Hi,

      Both the stocks were on accumulate for quite sometime and have bounced back from lows….hence changed the status to hold. Also we would like to see Q2 results.

      • Karna

        Thanks Ayush.

        Regards,
        Karna.

  • Vijay

    Astrazenca got first installment of 25 cr from parent, future look great,

  • Vivek Gautam

    What’s your analysis of Canfin Homes latest results?

    • Ayush

      The results look good. Its commendable the way the co has grown so quickly.