Satin Creditcare Network: 25%+ AUM growth with possibility of beating FY24 guidance for a PE of 6
One of India’s largest Microfinance Institution is delivering ahead of management guidance and available for reasonable valuations on a PE and P/B
1. One of India’s largest Microfinance Institution
satincreditcare.com | NSE: SATIN
Satin Creditcare Network Limited (SCNL) is one of India’s largest Microfinance Institution (MFI) in terms of Gross Loan Portfolio, headquartered in Gurugram
SCNL microfinance business is based on the Joint Liability Group model, which allows it to provide collateral-free, microcredit facilities to economically active women in both rural and semi-urban area.
SCNL has two subsidiaries
Satin Housing Finance Limited has a 100% retail book comprising affordable housing loans and loan against property.
Satin Finserv Limited, providing MSME loans and conducting Business Correspondence operations
2. FY23: Highest profitability for SCNL
3. Q1-24: Best first quarter in terms of growth & profitability in the last 5 years
YoY Growth
Revenue = up 34%
PAT = up 142%
4. Outlook: Beating a conservative guidance for FY24
i. On track to deliver 25+% AUM growth for FY24
The guidance for 25% growth plus, I think we are well on track of that.
ii. Possibility of beating the ROA guidance of 3.5% in FY24
My sense is as we go further and further quarters, I think that guidance of 3.5%. I think we have -- we will probably over achieved that
iii. 25%+ AUM growth without the need of raising capital
So for us right now, we feel that there is no pressing need for raising further capital.
iv. Margins expected to increase
25% growth technically happens without doing too much on opex. Our opex reduced in the last year. It has come down to 6.1%. So there is no question of any opex increase. In fact, it's going to be a decrease from here only moving forward.
5. 25%+ AUM growth at a PE of 6
6. So Wait and Watch
If I hold the stock then one can hold on as SATIN has delivered a guidance beating performance in Q1-24. This has opened up the possibility of the AUM and ROA guidance to be increased for FY24. One needs to wait and watch for quarterly results to see if the company is delivering on the FY24 AUM growth and ROA as guided by the management.
7. Or, join the ride
If I am looking to enter the stock then
For the growth SATIN has delivered in Q1-24, the PE of 6 looks attractive against the management guidance of 25%+ AUM growth.
At a book value of Rs 180 the stock is available at price to book (P/B) of 1.2 which offers headroom for increase in the P/B multiple
Possibility of SATIN delivering ahead of the 25%+ AUM growth and ROA guidance in FY24.
Delivering opex without increasing costs will improve profitability of SATIN
If Q1-24 was the best first quarter in terms of growth & profitability in the last 5 years and if we get more of such quarters then why cant the stock price be the best price in the last 5 years?
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Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades