Muthoot Finance, Repco, CARE Among Yes Securities' Top Picks In SFBs, NBFCs, HFCs, Ratings; Q2 Results Preview

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Yes Securities Report

Q2 FY26 would be characterized by incremental cyclical recovery in microfinance, sustained growth and asset quality challenges for vehicle financiers, largely unchanged portfolio growth and delinquency trends for affordable housing finance companies, continued growth tailwinds for Gold Loan companies with incessant rally in gold price, and sustained credit cost pressure for MSME financiers.

Financiers who would outperform within their segments would be Ujjivan Small Finance Bank, CredicAccess Grameen, L&T Finance, Shriram Finance, Can Fin Home, Repco Home, Aadhaar Housing and Muthoot Finance.

In our Credit Ratings coverage, we expect a broadly stable growth momentum (adjusted for higher base in Q2 FY25) with CARE and CRISIL performing better than ICRA.

Our top picks include Ujjivan SFB, Can Fin Home, Repco Home, Aptus, Muthoot Finance, CRISIL and CARE.

The lending companies we like have stable-to-improving growth visibility and would continue to demonstrate relative resilience in asset quality.

In terms of segments, we see scope for re-rating in Microfinance and Affordable Housing if asset quality trends hold-up in the near term. Trends in non-ratings businesses are likely to improve over coming quarters for CRISIL and CARE.

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