Broker’s call: Satin Creditcare (Buy)

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Target: ₹324.10

CMP: ₹196.25

Satin Creditcare Network Ltd. (SCNL) is one of India’s largest Microfinance Institutions (MFI) in terms of Gross Loan Portfolio operating out of Gurugram with a strong presence in North India.

The assets under management (AUM) has reached ₹889 crore as of Dec’23, showing a strong growth of 38 per cent y-o-y, mainly driven by disbursement growth of 41 per cent y-o-y. The management is confident of growing the book by over 25 per cent y-o-y till FY28.

Satin’s growth has surpassed the company’s guided range of 25 per cent demonstrating its robust momentum. The company will focus on new loans instead of top-up loans to augment the overall client base. The quality of the company’s portfolio has been consistently improving with an increase in the provision coverage ratio. Stage 3 has declined from 4 per cent to 2.4 per cent as of Sep’23 on a y-o-y basis.

The recent credit rating upgrade (A stable from A-stable) provides reassurance regarding the company’s margins. Satin has recently raised equity funds to aid future growth prospects. We expect the company to register an AUM growth of 25 per cent + in FY24 & FY25 while maintaining a Return on Assets of 4 per cent+ and a Return on Equity (RoE) of 20 per cent+.

We initiate coverage on the stock with a Buy Rating for a Target price of ₹324.1 valuing at 1x P/BV of FY25.