Fundamentals Intact Of This Mid Cap NBFC Stock, Buy To Receive 49% Upside: Monarch Capital

Monarch Networth Capital has given buy rating to leading mid cap NBFC sector stock, CreditAccess Grameen Ltd (CREDAG) with a target price of Rs 1315 apiece. If you buy CreditAccess Grameen Ltd, you will get 49% potential upside. The company has a market capitalisation of Rs 13,764 crore. Check key details below:

1. CreditAccess Grameen Ltd Stock Performance & Return

The last trading price of the stock is Rs 881 apiece with an intraday dip of 3.28%. The stock's 52-week high is Rs 1154 apiece and 52-week low is Rs 560 apiece, respectively.

2. RBI Securitisation Norms

The new RBI norms on securitization is unlikely to impact CREDAG as it does not borrow through this route. As at H1FY23, it had ~8% of its total borrowing through the direct assignment (DA) route (historically in the range of 5-10%).

Also, given the nature of loan exposure (90%+ of loan exposure is with an average duration of 2 years+), the new regulation, according to the management, is unlikely to deter them from accessing the securitised transaction opportunity later.

3. Sensitivity To RoE

Management has guided for credit costs of 2% at the upper end for FY23, while we have built in 2.5% on a conservative basis. For FY24E, we have factored in credit cost at 1.8%.

Even as we consider 25/50bps increase in credit cost following continued unrest due to political interventions, the impact on RoE would be to the tune of 70-140bps as against our current estimates of FY24E RoE at 18.6%.

4. Valuation & Rating

According to Monarch Networth Capital, "With the recent correction in the stock price, CREDAG trades at attractive valuations of 2.5x/2.1x FY24/25 P/BV. Given its ability to deliver high teens RoE, we believe current valuations provide decent entry point from a risk/reward perspective. We expect premium valuations to sustain and maintain our target P/BV multiple of 3.3x its Sept'24 BV of Rs.399 and retain our TP of Rs1,315."

About CreditAccess Grameen

CreditAccess Grameen Limited (CA Grameen) is India's largest microfinance institution, headquartered in Bengaluru, Karnataka. It is publicly listed on the NSE and BSE, and recognized by the Reserve Bank of India. The company is popularly known as "Grameen Koota" amongst its customers, translating to "rural group" in Kannada.

 

Disclaimer

The stock has been picked from the brokerage report of Monarch Networth Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.