CreditAccess Grameen - Q2 FY21 Result Update - YES Securities

CreditAccess Grameen (Q2 FY21) - BUY (Target Rs810, Upside 19.4%)

Soft Q2, but on way towards achieving trend profitability - Retain BUY, Upgrade 12m PT to Rs810

Overall CREDAG's performance in Q2 FY21 can be termed as soft. While profit was largely in-line with our expectation, the PPOP was 15% lower due to contraction in NIM (10% NII miss) and more than anticipated decline in consol. AUM (5% qoq). The liquidity buffer was raised from 10% to 15% of BS on sequential basis as significant liquidity was tapped from various available sources to support growth normalization in H2 FY21. Having built significant Covid provision in preceding two quarters, the management chose to do a relatively smaller addition in Q2 FY21 considering improving trends in collection efficiency and borrower activation. The standard asset provisioning buffer in stand-alone company stands at 3.5% and in MMFL at 2.8%.

With expectation of collection efficiency largely normalizing by the end of December, the Management expects Covid related credit cost to 3.75-4%. Having resumed new customer acquisition from October, the AUM growth for the year is targeted at 10-12%. FY22 is likely to play out as a normal year from growth perspective and credit cost too is estimated to largely regularize (some spillover of Covid related write-offs).

Recent equity capital raising of Rs8bn, unwinding of liquidity buffer and utilization of latent growth capacity would enhance PPOP margin/growth in FY22. We see CREDAG delivering 4.2-4.5% RoA in the next year. Valuation at 2.3x FY22 P/ABV is palatable for a quality MFI franchise on its way towards achieving trend profitability. Retain BUY and upgrade 12m PT to Rs810, as we factor capital raise and restrained credit cost.

YES Securities - CreditAccess Grameen (Q2 FY21) - 20201109

Shares of CreditAccess Grameen Ltd was last trading in BSE at Rs.727.35 as compared to the previous close of Rs. 677.4. The total number of shares traded during the day was 11580 in over 1331 trades.

The stock hit an intraday high of Rs. 733.2 and intraday low of 665.45. The net turnover during the day was Rs. 8267792.

Source : Equity Bulls

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