Broker’s call: Aavas Financiers (Buy)

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Target: INR 1678

Target: INR 1,369.85

India’s affordable housing market of Rs 5,300 crore is served by only 11 per cent of the Affordable Housing Finance Companies (AHFC). Aavas fundersManagement expects this space to be set to post a 32 percent market volume compound annual growth rate during fiscal 22-25, supported by long-term structural trends.

Aavas Financiers dominates with a record of Rs 14,200 crore, with a market share of 2.6 per cent as in FY22. It has the potential to reach a market share of 3.8 per cent by FY25.

We are excited by AAVAS’s steps to stabilize senior management and governance, the cultural shift and the ongoing disciplined approach to Phygital’s business and its veteran writers. Managing risk over explosive growth will continue to help asset quality.

25% compound annual growth rate of assets under management and 20% NII compound annual growth rate during FY23-25, 2.8 to 2.9% operating assets to assets ratio, 5% spread, mean A GDP of 1 percent translates to a compound annual earnings growth rate of 27 percent, with a return on assets of 2.9 to 3 percent and an average return on equity of 16 to 17 percent over FY23-25.

. We lowered our TP to $1,678 from $2,815 as we reduced our multiplier to 3.1x FY25 from 5.0x as AHFC canceled out. We repeat the purchase.