Buy CreditAccess Grameen; target of Rs 1425: Motilal Oswal

Motilal Oswal's research report on CreditAccess Grameen

CreditAccess Grameen’s (CREDAG) 4QFY25 PAT stood at INR472m (est. INR698m). FY25 PAT declined ~63% YoY to INR5.3b. 4Q NII was flat YoY at ~INR8.8b (in line). PPOP declined ~7% YoY to INR6.3b (~7% miss). Cost-income ratio rose ~50bp QoQ to ~31.8% (PY:~30% and PQ: ~31.3%). Reported yields rose ~20bp QoQ to ~20.4% (because of lower interest income reversals) and CoF was stable QoQ at 9.8%. Reported NIM expanded ~20bp QoQ to ~12.7%. We model NIMs of 14.5% in FY26/FY27 each (vs. ~14.6% in FY25). Disbursements dipped ~20% YoY but grew ~27% QoQ to ~INR65b. AUM grew ~4.6% QoQ but declined ~3% YoY to ~INR259b (PY: ~INR267b). The borrower base declined ~2% QoQ to ~4.7m (PQ: ~4.8m). It added four branches during the quarter to reach 2,063 branches.

Outlook

CREDAG trades at 2.0x FY27E P/BV and its premium valuations over its MFI peers will sustain, given higher confidence in its ability to bounce back to normalcy, much ahead of its peers. Reiterate BUY with a revised TP of INR1,425 (based on 2.4x Mar’27E P/BV).