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Buy CreditAccess Grameen; target of Rs 585: ICICI Securities

ICICI Securities is bullish on CreditAccess Grameen has recommended buy rating on the stock with a target price of Rs 585 in its research report dated Jun 01, 2020.

June 03, 2020 / 12:33 PM IST
 
 
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ICICI Securities research report on CreditAccess Grameen

E CreditAccess Grameen’s (CAGL) Q4FY20 result is characterised by two key events: a) completion of first phase of Madura acquisition (~76%) and b) proactive building of Covid-19-related contingency provision of ~Rs0.8bn (87bps of loans). Key highlights of the quarter: 1) strong 38%/17% YoY growth in AuM/borrowers; 2) ~40bps decline in cost of borrowing to 9.6% (marginal cost of borrowing is lower by ~50bps at 9.1%) even in a most challenging quarter; 3) GNPA increase to 1.57% (0.85% in Q3FY20); and 4) ~70% YoY decline in standalone PAT to Rs228mn due to merger-related expenses (Rs150mn) and elevated credit cost due to Covid-19. Though the merger brings in synergy, decline in consolidated CAR to 23.6% (post acquisition) and Madura’s high concentration in Tamil Nadu (most districts in red zone) poses near-term risk.


Outlook

However, strong execution track record, weekly collection model, customer profile (~35-40% unique and ~75% >1 year) and ability to raise funds at competitive rates, would ensure CAGL navigating the current challenging phase relatively better than peers and emerging stronger in post Covid-19 era. Maintain BUY with a target price of Rs585.



For all recommendations report, click here


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Broker Research
first published: Jun 3, 2020 12:33 pm

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