Aavas Financiers - Building Bricks In Place: Nirmal Bang

Nirmal Bang Report

Disbursements are seeing healthy momentum with a pick-up expected in Q4 FY24; we expect loan growth of 22%/24% in FY24/FY25E.

Competitive intensity remains high in housing loans; non-housing loans portfolio share is expected to expand to 35%, driven by micro, small and medium enterprise lending.

Guiding for spreads at ~5%; opex remains elevated as Aavas Financiers Ltd. invests in the franchise (LOS & LMS roll-out). Expect costs to start moderating in FY25/FY26E.

We expect assets under management to clock a compound annual growth rate of ~23% over FY23-FY26E and expect FY25E return on asset/return on equity at 3.2%/14.7%.

We trim our December-25E price/adjusted book multiple to three times (from 3.2 times earlier), factoring in the recent correction and maintain Buy with a target price of Rs 1,775.

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