AAVAS Financiers (AAVAS)’s 2QFY25 PAT grew 22% YoY to ~INR1.48b (inline). 1HFY25 PAT grew 18% YoY to ~INR2.74b and we expect 2HFY25 PATto also grow by ~18% YoY. 2Q NII grew 9% YoY to ~INR2.42b (in line). 2Q core NIM (calc.) declined ~25bp QoQ to ~6.6%. Reported spreadsdeclined ~10bp QoQ to 4.9% (vs. ~5% as of Jun’24). Management shared that it has raised its prime lending rate (PLR) by ~25bp,effective Oct’24. The company guided for spreads of ~4.8%-5.0% in FY25. It aims to improve the disbursement yield by increasing the proportion of lower ticket size loans and self-employed customers/self-construction properties.
OutlookThe stock trades at 2.7x FY26E P/BV and any re-rating in valuation multiples will depend on stronger AUM growth and delivery of operating efficiencies to further improve the RoA profile. Maintain Neutral with a TP of INR1,880 (based on 2.7x Sep’26E BVPS).
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