Yes you are correct. Cannot expect higher valuation unless their fundamentals are exceptional (highly unlikely in a commodity lending industry).
Yes credit costs were abnormally low for the entire industry in FY24. If credit costs remain within 1.5% in FY25 then we can expect 1250 to 1500 cr of PAT. If higher credit costs materialize then PAT could degrow. Usually they have better credit costs than industry in normal times due to better CEs.
They guided to reduced collections team expenses as well, but didn’t materialize in FY24. Outsourced collections team is still strong.
They are also in CAPEX mode with new branch additions so OPEX will weigh on PAT. Alas, to the market only growth numbers matter, this is an opportunity for LT investors, recognizing opportunity in LT when market focuses on ST.
Current fall from 60 is just market’s anxiety towards loan waivers which reoccurs every election cycle. Once elections are over, the market will dust off the risk (which has nil probability of materializing anyway). Entire MF sector has seen such fall. Ujjivan may have had additional fall due to some arbitrageurs exiting as the arbitrage was down to low single digits.
Some uncertainty due to CEO change requirement also remains, they should focus on announcing an internal (my opinion) candidate soon (mid-year). That should give some relief to the market’s anxiety. In the meantime as BVPS keeps rising, there should be support to the price.
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