Why Motilal Oswal retained 'Neutral' call on Can Fin Homes despite Q2 beat?

Motilal Oswal Financial Services (MOFSL) has reiterated its Neutral rating on Can Fin Homes shares following the company’s Q2 FY26 results, citing its consistent ability to maintain asset quality over the years—a trend they expect to continue.

 

MOFSL has set a target price of ₹915 per share, based on a 1.7x price-to-book value (P/BV) multiple for September 2027 estimates. The brokerage projects a compound annual growth rate (CAGR) of 14 per cent, 13 per cent, and 13 per cent in net interest income (NII), pre-provision operating profit (PPOP), and profit after tax (PAT), respectively, over FY25-28. The return on assets (RoA) and return on equity (RoE) are forecast at 2.2 per cent and 17 per cent for FY28.

 

Can Fin Homes Q2FY26 results

In Q2 FY26, Can Fin Homes reported an 18.88 per cent jump in PAT to ₹251.43 crore, up from ₹211.49 crore in the same quarter last fiscal. Total income from operations rose 9 per cent year-on-year (Y-o-Y) to ₹1,049.45 crore, compared to ₹962.69 crore in Q2 FY25. However, total expenses also increased by 4.3 per cent Y-o-Y to ₹717.88 crore from ₹688.60 crore.

 

The company’s loan portfolio stood at ₹39,657 crore as of September 2025, marking an 8 per cent increase from ₹36,591 crore in the year-ago quarter. Housing loans constitute 74 per cent of the loan book, while non-housing loans (including commercial real estate) account for the remaining 26 per cent.  ALSO READ | 3 reasons why Axis Securities slashed IndiaMART Intermesh target price

Analyst commentary, future outlook

Analysts at MOFSL described Can Fin Homes’ quarterly performance as mixed. While earnings, they said, exceeded expectations, driven by strong net interest income and lower credit costs, loan growth remained subdued despite a 26 per cent quarter-on-quarter (Q-o-Q) rise in disbursements. This was attributed to elevated borrower pay-outs leading to higher repayments. Asset quality improved, resulting in benign credit costs, and net interest margin (NIM) expanded approximately 20 basis points Q-o-Q, supported by a sharp decline in borrowing costs.

 

“While disbursement momentum strengthened in Q2, the ongoing IT transformation may temporarily disrupt disbursement activity in Q3 FY26, potentially keeping loan growth muted in the near term,” MOFSL analysts noted in their research report.

 

The brokerage highlighted that the company has reaffirmed its FY26 disbursement target of ₹1,050 crore, although Q3 disbursements are expected to be modestly impacted by the IT transition. Management remains confident of a strong recovery in business momentum in Q4, with loan growth guidance of 12-13 per cent for FY26 and around 15 per cent from FY27 onwards.

 

“Management has raised its FY26 guidance for spreads and NIM to approximately 2.75 per cent and 3.75 per cent, respectively, supported by continued benefits from a lower cost of funds. Asset repricing is ongoing, albeit with a lag. Competition in the housing finance sector remains rational, with no signs of aggressive or irrational pricing,” the analysts added.  ALSO READ | Nuvama retains 'Buy' on Sunteck Realty, trims target to ₹531 on MMR caution 

MOFSL has increased its FY26 earnings per share (EPS) estimate by about 5 per cent, factoring in higher NIMs and lower credit costs, while keeping FY27 EPS estimates largely unchanged. The brokerage projects a CAGR of around 13 per cent in advances and PAT over FY25-28, with RoA and RoE at roughly 2.2 per cent and 17 per cent in FY28.

 

“Can Fin Homes is, in our view, a robust franchise with strong moats on the liability side. However, we await: (1) execution on its loan growth guidance, and (2) clarity on potential disruptions (if any) arising from the tech transformation planned for this calendar year, before turning constructive on the stock,” MOFSL concluded.