CreditAccess Grameen share: Credit cost guidance disappoints; here are target prices

CreditAccess Grameen's (CREDAG) September quarter results were strong in a seasonally weak quarter, led by higher other income and lower-than-expected operating expenses. That said, analysts are disappointed with the increase in credit cost guidance, as they maintained neutral-to-positive bias on the stock. 

CreditAccess Grameen guided for 70–100 basis points (bps) higher credit costs in FY26 and credit costs of 4-4.5 per cent in FY27, including 70–80 bps higher provisions from the ECL revision. While the upward revision in credit cost guidance is a near-term negative, underlying business trends and expected recovery in 2H remained on track, analysts said.

HDFC Institutional Equities said CreditAccess Grameen's September quarter  earnings were ahead of its estimates due to strong other income and lower than expected operating expenses. Business momentum saw an uptick with AUM and disbursals growth of 3.1 per cent and 33 per cent YoY, respectively, driven by retail finance. It is likely to further accelerate in H2FY26, the brokerage said as it sees signs of normalisation in asset quality, thanks to reducing PAR-0 portfolio (4.7 per cent against 5.9 per cent in Q1) and steady monthly PAR 15+ accretion rate. 

"However, the management increased the credit costs guidance by 70-80bps for FY26 and FY27, leading to
a revision in FY26/FY27 earnings estimates by 19 per cent/15 per cent. We maintain ADD with a revised RI-based target of Rs 1,450 (implying 2.4x Sep-27 ABVPS). We expect the premium multiple to sustain due to superior operating performance and reversion to a steady state faster than peers," it said.

MOFSL said CREDAG has successfully navigated a period of industry-wide challenges, demonstrating remarkable resilience, and has reverted back to its normalised operational efficiency. New stress formation (including in Karnataka) has normalised, supported by robust internal processes, stable PAR bucket roll forward rates, and range-bound PAR 15+ accretion rate, it said.

"With structural levers such as branch network expansion and strengthening collection efficiency across key geographies firmly in motion, it is well-positioned to deliver a strong improvement in loan growth and profitability from 2HFY26 onwards," it said while suggesting 'Buy' and a target of 1,690 on the stock.