Buy Spandana Spoorthy Financial; target of Rs 1100: ICICI Securities

ICICI Securities is bullish on Spandana Spoorthy Financial recommended buy rating on the stock with a target price of Rs 1100 in its research report dated October 31, 2023.

Broker Research

November 03, 2023 / 14:53 IST

Buy

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ICICI Securities research report on Spandana Spoorthy Financial

Since the new management took charge in Mar’22, Spandana Spoorthy (Spandana) embarked on a transformation journey to build a long-term sustainable micro-finance business model. Ever since, Spandan’s earnings trajectory kept improving (all the past six quarters) – RoA expanding to 5.5% by Q2FY24, from 2.9% in Q2FY23; RoE expanding to 15% by Q2FY24, from 8% in Q2FY23. While business growth momentum sustained in Q2FY24, evident in strong 11% QoQ AUM growth and NNPL falling to 0.4%, a drop in collection efficiency to 97.7% versus 98.1% QoQ and 1-90 DPD portfolio increasing to 2.04% versus 1.36% QoQ pose risks to the credit cost trajectory ahead.

Outlook

However, management highlighted that the drop in collection is transitory in nature led by change in collection frequency for customers as part of its ‘Project Parivartan’. Maintain BUY and target price of INR 1,100, valuing at 2x Sep’24E BVPS.

For all recommendations report, click here