Broker’s call: Aavas Financiers (Buy)

Broker’s call: Aavas Financiers (Buy)


Target: ₹2,130

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CMP: ₹1,663.10

We met the management of Aavas Financiers and discussed about the business momentum as well as asset quality trends. Management remains confident of achieving 20 per cent AUM growth in FY25, aided by 20-25 per cent growth in disbursements. Management expects disbursement yield to surpass AUM yield in FY26. The company is also comfortable on growing MSME segment, where yields are about 15 per cent.

The company remains positive on expanding into southern markets due to pristine asset quality trends. Spreads are expected to improve to about 5 per cent in Q3-FY25 (vs 4.89 per cent in Q2-FY25), led by higher yield (due to BPLR hike) and lower COF (due to IFC borrowings). In case of policy rate cut, the spreads will improve even further as 30 per cent of liabilities are linked to EBLR and 20 per cent are linked to shorter duration MCLR. Asset quality is expected to improve strongly in Q3-FY25 with 1+dpd now at 3.81 per cent in Oct-24 vs 3.97 per cent in September 24. This is seen declining further in Q3FY25.

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We expect disbursement growth to remain strong aided by lower TAT (6 days vs 13 days) and tapping the newer markets. In addition, strong asset quality to support profitability.





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