Buy CreditAccess Grameen; target of Rs 1650 HDFC Securities

HDFC Securities' research report on CreditAccess Grameen

CreditAccess Grameen (CREDAG) delivered steady in-line outcomes, as AUM growth began normalising, albeit the retail finance business grew sharply on a low base. AUM growth clocked in at 36% YoY (+3% QoQ), led predominantly by new customer additions and a modest rise in average ticket size. Asset quality continued to be impressive with PAR-0/GNPA at 1.3%/0.8%, resulting in benign credit costs. Asset yields continued to reflate (+40bps QoQ), and concomitant with benign credit costs, drove RoA/RoE of 5.6%/24.7%. While the company could witness incremental pressure on NIMs (higher cost of funds and changing loan mix), CREDAG is poised to sustain its strong earnings on the back of operating leverage and low credit costs.

Outlook

We raise our FY24E/FY25E earnings estimates by 15%/13% for sustained improvement in operating metrics; maintain BUY, with a revised TP of INR1,650 (3.0x Sep-25 ABVPS).