CreditAccess Grameen share price jumps 7% as Goldman Sachs initiates coverage with a ‘Buy’, sees 25% upside potential

CreditAccess Grameen share price jumped nearly 7% on Friday after foreign brokerage firm Goldman Sachs initiated its coverage on the stock. CreditAccess Grameen shares rallied as much as 6.96% to ₹1,528.00 apiece on the BSE.

Goldman Sachs initiated its coverage on CreditAccess Grameen shares with a ‘Buy’ rating as it believes the non-banking financial company (NBFC) is riding the up-cycle well and the diversification will improve earnings visibility.

The broking firm has CreditAccess Grameen share price target of ₹1,788 per share, implying an upside potential of over 25% from Wednesday’s closing price.

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CreditAccess Grameen is a non-bank-finance company focused on the micro-finance business (MFI), predominantly in the rural areas of India. 

Goldman Sachs believes the company is well positioned to tap into an expanded MFI lending-TAM and is diversifying the customer base/loan book via cross-sell/up-sell opportunities that should drive more predictable and profitable lending growth over next few years with reduced cyclicality, if executed well. 

“CreditAccess Grameen has demonstrated a good track record through the cycles, and we forecast a healthy 21% PAT CAGR (GS coverage at 15%) over FY24-FY26E on strong lending CAGR of 24% (vs system lending CAGR at 13%) and continued superior profitability with average ROAs of 5.6%,” Goldman Sachs said.

This will be on the back of a diversified loan book, market share gains from existing/new geographies, and maintaining a competitive edge on industry-leading credit costs and operating efficiency, it added.

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CreditAccess Grameen stock currently trades at 2.7x P/B and 12x P/E FY25E which is at a discount of 27% to NBFCs within the brokerage’s coverage on P/E. It values CreditAccess Grameen at 15x FY25E EPS (implied 3.4x P/B), which also reflects superior operating metrics with PAT CAGR at 21% (covered NBFC avg. at 18%) over FY24-26E, and average ROE of 24% (covered NBFC avg. at 15%). 

CreditAccess Grameen share price has gained over 11% in the past one month, while the stock is down over 7% in 2024 so far. In the past one year, CreditAccess Grameen shares have rallied more than 56%.

At 2:20 pm, CreditAccess Grameen shares were trading 2.77% higher at ₹1,468.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.