Buy CreditAccess Gramin; target of Rs 1600: ICICI Securities

ICICI Securities research report on CreditAccess Gramin

CA Grameen continued to deliver strong operating performance in Q2FY24 as reflected in RoA sustaining at >5% and RoE at 25% for three consecutive quarters. Profitability was largely driven by steady AUM growth, efficient liability management (CoF increased by only 30bps since Sep’21) and controlled asset quality. Notably, its strong operating efficiency reflects in one of the lowest cost-AUM ratio at 4.7% as on Sep’23 - ~88% customer retention ratio enables minimal cost of incremental disbursement. Better-than-expected H1FY24 financial performance led to management revising FY24 guidance upwards – a) RoE: to 24-25% from 20-21% earlier, b) RoA: to 5.4-5.6% from 4.7-4.9% earlier and c) NIM: to 12.7-12.8% from 12-12.2% earlier, while it maintained AUM growth target at 24-25%.

Outlook

Maintain BUY with a revised target price of INR 1,600 (earlier: INR 1,550), valuing the stock at 3.7x Sep’24E BVPS.