Morgan Stanley has maintained its Overweight rating on Can Fin Homes, with a target price of ₹880, implying an 8% upside from the current market price of ₹815.00. The brokerage noted a steady operational performance in Q1FY26, with net interest income (NII) and loan spreads showing strong improvement, despite seasonal weakness in disbursements and a modest rise in asset stress.
Pre-provision operating profit (PPOP) grew 9% year-on-year, beating Morgan Stanley’s estimate by 3%, while profit after tax (PAT) stood at ₹2.2 billion, 2% ahead of expectations. The miss on profit before tax (PBT) was attributed to higher credit costs.
Loan growth was 9% YoY and 1% QoQ, while disbursements came in at ₹20.1 billion, up 9% YoY but down 18% sequentially, reflecting the seasonal softness typically seen in Q1 for housing finance companies (HFCs).
Importantly, NII rose 13% YoY and 4% QoQ, coming in 4% above estimates. The reported loan spread rose 7 basis points QoQ, while the calculated spread improved 13bps sequentially and 19bps YoY, indicating better margin dynamics.
Asset quality showed a mild deterioration, with gross NPAs rising by 11bps QoQ to 0.98%, likely due to higher net stage 3 formation during the quarter.
Morgan Stanley believes the management’s guidance on FY26 loan growth and margin trajectory will be critical in assessing medium-term performance. Despite seasonal and credit-related challenges, the brokerage remains positive on the company’s fundamentals.
Disclaimer: The brokerage view is based on publicly available research and does not constitute investment advice. Please consult a certified financial advisor before making any investment decisions.
