CreditAccess Grameen shares: JM upgrades CREDAG stock to buy, MOFSL sees 17% upside

CreditAccess Grameen Ltd (CREDAG) saw its shares rallying 5 per cent in Wednesday's trade as the MFI as JM Financial upgraded the stock to 'Buy' and MOFSL's updated target price on the stock suggested 17 per cent potential upside on the stock post CREDAG's Q1 results.

MOFSL said it does acknowledge that the residual stress from Karnataka slippages and incremental stress from the implementation of MFIN guardrails 2.0 will have to be provided for, which will keep credit costs elevated in 2QFY26 as well. But there is a trend reversal on the horizon in the microfinance sector, which will play itself out over the next one-two quarters and get the sector to near-normalization (operationally) in 2HFY26, it said. 

"We strongly believe that the coming three months present an opportunity to separate high-quality franchises from weaker ones, with performance divergence across the MFI sector expected to be increasingly evident," it said.

On Wednesday, the stock rose 4.51 per cent to hit a high of Rs 1,338 on BSE. JM Financial said the CreditAccess Grameen stock is  trading at a valuation of 2.5 times 1-Year forward FY27 book value per share, similar to long-term average). It expects 15 per cent AUM CAGR over FY25-27E with an average RoE of 15 oer cent for FY26-27. 

"Given improving outlook, we upgrade the stock to BUY and revise our target to Rs 1,475 valuing it at 2.6x FY27E BVPS (vs. earlier target of INR 1,135 valued at 1.9x FY27E," it said. 

MOFSL said CREDAG trades at 2.1 times FY27 P/BV and its premium valuations over its MFI peers should be sustained, given its ability to bounce back to normalcy, much ahead of its peers. It maintained 'Buy' with an unchanged target of Rs 1,500.  

Analysts said CREDAG's Q1 PAT was up 27 per cent QoQ, but was down 85 per cent YoY. Cedit cost declined while PAR numbers stabilised across states with headline gross NPA remaining steady. 

The management expects credit costs to remain elevated in Q2 and stabilise to 3-3.5 per cent in 2HFY25. 

"FY26 growth/RoE guidance was maintained at 14-18 per cent and 11.8-13.3 per cent with major contribution coming from 2HFY26 especially from retail finance book. While MFI is not completely out of woods, CREDAG should be the first one among MFIs to recover from current stress cycle given its ability to recognise early stress, accelerated write-off policy and higher ECL cover," JM Financial said.