Buy CreditAccess Grameen; target of Rs 1450: Motilal Oswal

Moneycontrol • 9 days ago

Original source

Key Investment Pillars

  • AUM growth acceleration: CreditAccess Grameen (CREDAG) expects 20-25% AUM growth, driven by faster retail finance expansion and improving customer retention.
  • Improving profitability: CREDAG has raised its FY27 profitability guidance, with RoA expected at 5.2-5.8% and RoE at 21-24%.
  • Strong NIM expansion: NIM expanded to 15.1% in 2QFY27, driven by lower interest reversals, a higher share of individual business loans, and stable borrowing costs.
  • Asset quality improvement: GNPA declined to 1.8%, and NNPA declined to 0.6%, with a PCR of 67.5%.

Thesis Validation Checklist

  • AUM growth: Monitor AUM growth, particularly in retail finance, to ensure it meets the guided range of 20-25%.
  • Credit costs: Track credit costs to ensure they remain within the guided range of 3-4%.
  • NIM expansion: Monitor NIM to ensure it expands as expected, driven by healthy asset quality and disciplined borrowing costs.
  • Customer retention: Watch for improvement in customer retention, which is crucial for sustaining growth momentum.