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Target: ₹185
CMP: ₹168.50
The management has indicated the growth visibility has improved post the implementation of new initiatives and tech overhaul. Currently, the pick-up in growth has been in the traditional segments of MSME and Gold loans, led by strong demand. This momentum is likely to continue, as the management expects CUB’s credit growth rate to converge with the systemic growth rate in FY25E and the pace to accelerate from FY26E onwards.
CUB will extend the MSME processes to the retail secured loans – LAP, Micro-LAP, and Housing as it looks to scale the book to constitute about 7-8 per cent of the portfolio over the next 3-4 years. The bank’s process to strengthen its executive and field team to kick-start its retail growth journey is underway. The management has also indicated that the bank will not look to pursue growth in the unsecured segment.
With growth visibility improving, we expect CUB to resume its growth journey and deliver a 14 per cent CAGR growth over FY24-27. The bank does not face challenges on deposit accretion and growth is likely to remain in line with credit growth, thereby keeping LDR stable.
While Opex appears elevated with the bank upfronting costs, improving branch productivity and growth should help improve cost ratios. We revise our rating from Hold earlier to Buy.
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