BUY (Target Rs650, Upside 20.4%)
CREDAG's stand-alone operating performance was stronger-than-expected with NII up 6% and PPOP up 11% qoq (excl. assignment income and one-time exp.), despite loan portfolio down 2% qoq (stood at Rs96.8bn) on negligible disbursements. PAT was weighed down by Covid related prov. of Rs1.41bn (cumulative at 2.4% of portfolio). ECL now stands at 4.4% v/s Gross NPL at 1.6%. Madura Microfinance's (MMFL - 76% holding of CREDAG) operating performance was muted with 11% qoq decline in both NII and PPOP (excl. assignment income) v/s loan portfolio contraction of 3% (stood at Rs20.4bn). Covid related provisions were Rs120mn (cumulative at 1.1% of portfolio). ECL now stands at 3.2% v/s Gross NPLs at 1.6%.
Collection Efficiency (without arrears) stood at 74%/54% in June and 76%/64% in July for CREDAG/MMFL. Consequently, portfolio under moratorium stands at 24%/36% for CREDAG/MMFL. In July, 64%/26% of CREDAG/MMFL customers paid all installments and 17%/22% customers made no payment. Covid provisioning buffer represents 18%/9% of CREDAG/MMFL's July moratorium portfolio. MMFL's non-paying customers fell sharply in July with operational intervention by CREDAG. Capital adequacy on consol basis is healthy (CAR at 24%/DER at 3.3x) and BS liquidity was raised to Rs16.4bn as of July 30. Improving collections, undrawn sanctions, funding pipeline and CREDAG's support cushions MMFL's ALM.
Retain BUY. Assume conservative covid-related credit cost of 5-6%. However, FY22 should be a normal year for growth and profitability. Valuation at 2.1x FY22 P/ABV does not fully capture FY22 recovery and an impending capital raise.
Shares of CreditAccess Grameen Ltd was last trading in BSE at Rs.547 as compared to the previous close of Rs. 531.35. The total number of shares traded during the day was 13266 in over 544 trades.
The stock hit an intraday high of Rs. 557.9 and intraday low of 536.1. The net turnover during the day was Rs. 7372209.