IGI Logo

CREDAG maintained its strong earnings performance with in-line PAT at Rs3.5bn, up 98% YoY, and RoA of 5.6% on the back of strong growth (36% YoY) and margin expansion (+110bps YoY/10bps QoQ). Going ahead, CREDAG expects growth to remain strong led by expansion in customer-count and ticketsize. From the medium-term perspective, Company expects GLP CAGR at 24- 25%, NIM moderation to 12.6-12.7% from the current ~13%, and steady increase in LLP including counter-cyclical contingent provision build-up.

Factoring-in the better growth trajectory and margin delivery, partly offset by higher provisions to build buffers, we raise our earnings for FY24-26E by 7- 15%. We retain BUY on the stock, with revised TP of Rs1,960/share (from Rs1,800), rolling forward on 3.4x Sep-25E ABV vs 3.5x Jun-25 ABV, given strong delivery on RoA/RoE at 5-6%/22-25% over FY24-26E, Management depth and better cross-cycle return metrics/asset-quality experience. CREDAG remains our preferred pick in the NBFC-MFI sector

Strong GLP growth, portfolio diversification and continued margin expansion

CREDAG continues to deliver impressive growth — 36% YoY/3% QoQ — fueled by 21% YoY surge in customer acquisition and effective GLP management, even during a softer quarter. Strategic focus on higher-yielding fresh disbursements (up 22%) expanded the portfolio yield to 21.1%. The company has managed its borrowing costs well — up only by 20bps QoQ to 9.8% — which led to NIM expansion by 10bps QoQ/110bps YoY to 13.1%. Company expects 2H to be seasonally strong and thus support GLP growth. It has entered the states of AP/Telangana, from where it anticipates strong disbursements in due course. Given its strategic focus on non-MFI JLG loans, Company targets this segment to form 15% of the total portfolio, including gold loans, AFH, 2W and LAP. From the medium-term perspective, the company expects GLP CAGR of 24-25% and NIM moderation to 12.6-12.7% from the current ~13%, as costs catch up

Asset quality improvement endures, but builds counter cyclical provision buffer

CREDAG continues to witness improvement in GNPA ratio to 0.8% (down by 12bps QoQ) and in NNPA to 0.24% (down by 3bps QoQ). PCR on the 90+ DPD portfolio stands at 69% and at 54% for Stage-2. Collection efficiency remains high at 99%, with no visible signs of stress yet. CREDAG has reserved Rs78mn to address the Rs720mn legacy MMFL book, which is now only 0.3% of the total GLP. The PAR book remains healthy — PAR 0 DPD at 1.3% (vs. 1.2% in Q1), PAR 30 at 0.9% (vs. 1.0% in Q1), PAR 60 at 0.8% (vs. 0.7% in Q1), and PAR 90 at 0.6% (vs. 0.7% in Q1). Going forward, the company aims to build counter-cyclical provision buffer and thus guides for elevated LLP.

We reiterate BUY, with revised TP of Rs1,960/share

Factoring-in the better growth trajectory and margin delivery, partly offset by higher provisions to build buffers, we raise FY24-26E earnings 7-15%. We retain BUY on the stock with revised TP of Rs1,960/share (from Rs1,800), rolling forward on 3.4x Sep-25E ABV vs 3.5x Jun-25E ABV, given strong delivery on RoA/RoE at 5-6%/22-25% over FY24- 26E, management depth and better cross-cycle returns/asset-quality experience. CREDAG remains our preferred pick in the NBFC-MFI sector. Key risks: Asset-quality deterioration in MFI (mainly in non-South markets) and unseasoned non-MFI portfolio.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf &

SEBI Registration number is INH000000354