The housing finance segment has drawn renewed attention after Can Fin Homes reported a solid September quarter, with profits exceeding market expectations on the back of stronger margins and contained credit costs.
Jefferies said the company’s performance showed “resilience in spreads and sustained operating leverage,” setting up a favourable base for growth in FY26. The brokerage said Can Fin Homes’ September quarter profit rose 19% year-on-year to Rs 250 crore, aided by better margins and lower credit costs, while loan growth and asset quality stayed steady.
The brokerage maintained its ‘Buy’ call on the stock, pointing to scope for re-rating as growth and profitability improve.
Jefferies expects margins to stay firm and loan growth to pick up steadily, while credit costs remain one of the lowest in the industry.
Jefferies on Can Fin Homes: Profit beat on better NIMs
Can Fin’s second-quarter results outperformed estimates. Net interest income (NII) increased to Rs 390 crore from Rs 335 crore, while lending yields held steady even as funding costs eased.
Jefferies said margin expansion was the key driver of the profit beat.
“Better NIMs led to a 6% sequential profit surprise,” it wrote, adding that the company’s focus on salaried borrowers and mid-income housing continues to provide strong asset stability.
Jefferies on Can Fin Homes: Loan growth steady
The loan book stood at Rs 35,700 crore as of September 2025, up 14% from the previous year.
Disbursements came in at Rs 2,600 crore, broadly in line with expectations.
Retail housing loans formed about 90% of total assets, reaffirming Can Fin’s focus on stable, low-risk segments.
Jefferies said growth should gradually accelerate through FY26 as demand from southern India and Tier-II markets remains firm.
It projected annual loan growth of 15–17% over FY25–28, supported by new branch additions and co-lending partnerships.
Jefferies on Can Fin Homes: Margins expand
Net interest margins improved to 3.9% from 3.7% a year earlier, aided by lower incremental borrowing rates.
The cost of funds declined to 7.4% from 7.6%, while lending yields remained stable, helping maintain spreads between 2.2–2.4%.
Jefferies said Can Fin’s disciplined approach to pricing loans and managing liabilities has allowed it to preserve margins despite competitive pressure from larger peers.
“Margin performance remains a key differentiator for Can Fin, helped by its granular book and efficient liability structure,” the brokerage wrote.
Jefferies on Can Fin Homes: Credit cost lowest among peers
Jefferies said asset quality remained among the best in the housing finance space.
Gross non-performing assets (GNPA) were unchanged at 0.6%, while net NPAs stayed near zero.
Credit cost dropped to 12 basis points from 20 basis points a year earlier.
The report added that the company’s borrower mix nearly 70% salaried and 30% self-employed, provides resilience against credit shocks.
Jefferies expects credit costs to remain below 15 bps through FY26, supported by stable recoveries and continued high collection efficiency.
Operating efficiency aids profitability
Operating expenses increased only 7% year-on-year to Rs 105 crore, reflecting tight cost control and better productivity.
The cost-to-income ratio improved to 22% from 24%, while both return ratios moved higher.
Return on assets (ROA) rose to 2.2%, and return on equity (ROE) to 17%, up from 15% a year ago.
Jefferies said digitisation initiatives, including faster loan processing and online onboarding, are enhancing productivity per branch.
“The company’s ability to sustain profitability without expanding its cost base meaningfully sets it apart from most mid-sized peers,” it added.
Jefferies on Can Fin Homes: Growth expected to pick up in FY26
The brokerage said disbursement momentum should accelerate from the December 2025 quarter as affordability improves and demand revives across small and mid-sized cities.
It forecast loan growth of 17% in FY26, rising to 18% in FY27, alongside double-digit earnings growth through FY28.
Net profit is projected to climb to Rs 1,025 crore in FY26 and Rs 1,170 crore in FY27, from Rs 880 crore in FY25.
ROE is expected to reach 18% by FY27, driven by steady spreads and low credit costs.
Jefferies on Can Fin Homes: Valuation and upside potential
After laying out the performance and growth triggers, Jefferies maintained its Buy rating on Can Fin Homes with a target price of Rs 1,050, implying an upside potential of 25% from the current market level.
The stock trades at 1.7 times FY26 estimated book value, which Jefferies said is “undemanding given the company’s superior return metrics and stable asset quality.”
The brokerage’s bull-case scenario values the stock at Rs 1,150, assuming faster disbursements and sustained NIM gains, while its bear-case valuation is Rs 850, factoring in a possible slowdown in loan demand or margin compression.
Sector view: Housing finance growth to stay steady
Jefferies said the housing finance industry continues to benefit from stable interest rates and structural demand in mid-income housing.
Sector-wide home loan growth is expected at 13–15% annually over the next three years.
It said mid-sized players such as Can Fin, Aavas, and Home First are well placed to capture market share as larger banks focus on high-value home loans.
Government housing incentives and continued urbanization will also keep credit demand firm.
Why Jefferies remains positive
“Can Fin Homes continues to deliver consistent earnings with one of the cleanest balance sheets in the sector,” Jefferies said.
The brokerage cited improving spreads, controlled expenses, and a focused business model as reasons for staying positive on the stock.
“Better NIMs and stable asset quality make the company one of the most reliable plays on affordable housing,” it added.