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 yoy, mainly driven by disbursement growth of 41 per cent yoy. The management is confident of growing the book by over 25 per cent yoy 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 yoy 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.
