Buy Capri Global Capital; target of Rs 230: Choice Equity Broking

Choice Equity Broking's report on Capri Global Capital

CGCL has undergone a transformation from a single product, geographically concentrated Loan Book to a geographically & portfolio diverse AUM. This diversification was achieved via high growth in existing products like Construction Finance & Housing Finance growing at a CAGR of ~44% and ~48% respectively over FY22 to FY25. Further, the successful launch of Gold Loans via an addition of 562 branches in FY23, growing the branch base significantly led to consolidated 3 year AUM CAGR of ~51% over the same period. Gold Loans are the highest yielding product, improving portfolio yields by ~155 bps over FY23 to FY25. We forecast CGCL will be able to sustain these higher yields as Gold Loans now form a significant ~36% of the total AUM. Further, a rating upgrade is likely to improve Cost of Funds; whereas more efficient branch unit-economics & operational leverage will expand NIMs & improve the cost to income ratio.

Outlook

We value CGCL using the Residual Income Approach. We calculate Cost of Equity to be at 11.3% with ROEs projected to reach 18.3% by FY28E supported by Income Growth & softening costs. We initiate coverage with a “BUY” rating and upside of 22%, implying P/ABV of 2.9x / 2.5x of FY27E/FY28E.

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