Ugro Capital - The Growth Stage Is In Place: Centrum Broking Initiates Coverage With A 'Buy' Rating

Centrum Broking Capital

We initiate coverage on Ugro Capital with a 'Buy' rating and a target price of Rs 395, premised on 2.0 times H1 FY26E price/adjusted book value, offering 49% upside. Ugro Capital is a tech enabled non-banking financial company with exclusive lending focus on micro, small and medium enterprise segment.

Our positive stance is underpinned by-

1. large total addressable market in MSME lending;

2. strong productivity metrics vis-a-vis peers reflecting scalability of business model;

3. efficient systems and processes backed by data analytics giving comfort on asset quality;

4. capital efficient co-lending/co-origination aiding assets under management growth and profitability; and

5. improvement in return on asset/return on equity profile as mix of high yield book rises and operating leverage plays out.

We expect AUM/earnings per share compound annual growth rate at 42%/67% over FY24-26E with RoA and RoE of 3.6% and 14.4%, respectively in FY26E.

Sustained growth and profitability to support re-rating in stock, in our view. At current market price, Ugro is trading at 1.4 times/1.3 times FY25E/FY26E price/adjusted book value.

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