Motilal Oswal Reiterates Buy Rating on CreditAccess Grameen, Targets Rs 1760

Motilal Oswal Reiterates Buy Rating on CreditAccess Grameen

CreditAccess Grameen (CREDAG) has reported its fourth-quarter (4Q) results for fiscal year (FY) 26, with Profit After Tax (PAT) standing at INR3.4 billion, in line with expectations. The company's FY26 PAT grew by 46% year-over-year (YoY) to INR7.8 billion.

The company's key financial metrics for 4Q FY26 showed Net Interest Income (NII) growing by 19% YoY to approximately INR10.5 billion, in line with expectations. Profit Before Other Income (PPOP) rose by approximately 23% YoY to INR7.8 billion, also in line with expectations. On the other hand, operational expenses (Opex) increased by approximately 15% YoY to INR3.4 billion, in line with expectations.

CreditAccess Grameen's cost-income ratio declined by approximately 370 basis points (bps) quarter-over-quarter (QoQ) to 30.4% (previous quarter: approximately 34% and previous year: approximately 32%). The company's disbursements rose by approximately 28% YoY and 44% QoQ to approximately INR83 billion. Its Assets Under Management (AUM) grew by 11% QoQ and 14% YoY to approximately INR296 billion.

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The management has guided that the company expects to grow its AUM by 20-25% in FY27, driven by steady growth in core microfinance (MFI) and faster expansion in non-MFI products. The company expects its core group loan (GL) portfolio to grow at approximately 10-12%, while most of the incremental growth is expected to come from non-MFI and individual finance products.

Outlook

Motilal Oswal estimates a compound annual growth rate (CAGR) of 21% in AUM and 55% in PAT over FY26-28E. This is expected to lead to a return on assets (RoA) of approximately 4.4% and return on equity (RoE) of approximately 18% in FY28. Given its superior execution, the company is expected to sustain its premium valuations over its MFI peers.

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Recommendation

Motilal Oswal reiterates its BUY rating on CreditAccess Grameen with a revised target price of INR1,760, based on 2.5x March 28E price-to-book value (P/BV).