Update: This stock really is Not a Multibagger. Since the Valuation change it is No Longer a Multibagger in our view. You can check other stocks from our latest Multibaggers pack.
https://futurecaps.com/tag/multibagger/
Futurecaps is a SEBI Registered Research Analyst providing Multibagger service to Indian Stock Market.
In this article we would like to evaluate the Multibagger Potential of Can Fin Homes Ltd. The primary attraction is this Branded Institution is quoting below Book Value.
About: CFHL was promoted in 1987, the “International Year for Shelter for the Homeless” by Canara Bank in association with reputed financial institutions including HDFC and UTI. Now NHB is also an important equity holder in CFHL.
Website: http://www.canfinhomes.com/
Let us start the job:
Warren Buffett Checklist
| History of Consistently Increasing Sales, Earnings & Cash Flow |  |
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| Durable Competitive Advantage | Company provides attractive interest rates, but bigger player exists in the arena, the solid growth in housing loans remains the core potential for our company. The recent management restructuring had paved 30% growth in EPS compared with the 10% growth for past 10 years. |  |
| Future Growth Drivers | India’s home loan market is growing in rate of 30%. | |
| Conservative Debt (long term debt < 3 Net Profit) | No. The total liabilities is around 300 crores & latest Net Profit is 55 crores, so the formula does not match. But eventually Banks & Financing companies have high debt ratios. |  |
| Return on Equity must be Above Average | Company is providing ROE around 14%, which is slightly lower than our 15% expectation. | |
| Low CAPEX required to maintain current operations | Yes. | |
| Management is holding / buying the stock | Yes. Promoter holding is around 40%. | |
| Price is Under Valued (< intrinsic value) | Stock is quoting 30% discount to Book Value. | |
| Stock Price is consolidating | Almost consolidating with down from 52wh. | |
Additional Futurecaps Checklist
| PE, PB Ratio | PE around 5, PB around 0.7 which are really attractive. | |
| Cash Flow Positive | Negative Net Cash Flow, but Operating Cash Flow is positive. | |
| Paying Dividends, Tax | Yes. | |
| EPS Growth Rate | 10% to 20%, but the Trailing year should show higher rates. | |
| Expected Gain in 10 Years | Considering EPS growth around 20%, the stock price should double every 4-5 years. For a 10 year period this could yield 4 times returns & a PE Peak around 12 should yield total of 8-10 times returns. | |
| Power of Brand | Branding attracts more sales, more profit margins! Company have the trust & fame of CANARA BANK! | |
| Corporate Governance, Reputation of Leaders | Company consistently behave well on corporate governance norms. | |
Additional Points
The current past year results are yet to declare, it shown above 30% growth in Net Profit & yield higher EPS resulting in lower PE. We expect the new PE Ratio around 3-4.
Declaration
Considering the under-valuation, growth rate, brand name, we declare Can Fin Homes as a potential multibagger.
Allocation
Although it is a B Group stock, but being large cap we recommend the regular 5-10% allocation of your total yearly stock corpus.
Disclaimer
Futurecaps recommends 20 to 25 multibaggers per year, We expect a 25% to 50% allocation of your savings in equity. The stocks recommended here are gone through Analysts of several years experience in stock market. Although they were successful in predicting future multibaggers, the overall stock market is a risky game. Filtering quality stocks from the total of 4000 companies should reduce the total risks. The past performance of the company might not sustain in future, but through proper diversification we are sure about multibagger-returns in the total portfolio. We recommend the reader to put his/her own thoughts, invest wisely taking responsibility by themselves.