Buy AB Capital; target of Rs 440: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Broad-based growth: ABCAP's NBFC AUM grew 26.5% yoy to Rs1.77trn, driven by strong retail and MSME traction. Disbursements rose 12% yoy to Rs247bn.
  • Improving asset quality: GS2+GS3 fell to 2.31%, with credit cost moderating to 0.92%. ROA improved to 2.45%.
  • Margin support: The increasing retail/unsecured mix is expected to gradually support margins, with a 25bps lending-rate hike aiding transmission of higher funding costs.
  • HFC momentum: AUM rose 50% yoy to Rs573.73bn, with disbursements up 55% yoy. Asset quality remains among the best in the industry.

Thesis Validation Checklist

  • Monitor asset quality: Watch for any deterioration in GS2+GS3 and credit cost.
  • Margin expansion: Look for signs of gradual margin expansion driven by the retail/unsecured mix.
  • HFC growth: Track AUM and disbursement growth in the HFC segment.
  • Management guidance: Monitor management's comments on growth, asset quality, and margins. Overall, the analyst remains positive on ABCAP due to its strong growth, improving asset quality, and margin support. Investors should watch for signs of continued growth, asset quality stability, and margin expansion to validate the thesis.