Shares of Aadhar Housing Finance rallied over 5 percent to Rs 411 apiece on September 3 after Kotak Securities initiated a 'buy' coverage on Aadhar Housing and set target price at Rs 550 apiece, implying an upside potential of 41 percent from current levels.
The bullish coverage comes as analysts believe that it is one of large diversified player with over 20 percent growth trajectory. Moreover, they said that the company distinguishes itself from most of its affordable housing finance peers with a larger balance sheet, longer history, and superior return on equity (RoE).
Its loan growth, projected at a 21 percent compound annual growth rate (CAGR) for FY24-27, aligns more with mature housing finance companies rather than rapidly expanding smaller affordable housing finance companies, Kotak analysts added.
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"We expect Aadhar to deliver a 22 percent EPS CAGR during FY24-27E, supported by 21 percent AUM growth, near-stable spreads, higher fees, and consistent improvement in operating leverage. RoE is expected to return to the high teens, following an IPO-driven reduction in H1FY25E, as leverage gradually rises and core profitability (4.4-4.7 percent RoA) remains strong," the brokerage firm highlighted.
However, analysts also underlined some key risks, such as the potential for reduced net interest margins or growth due to increased competition in larger markets or risk to asset-quality if there an increased proportion of self-employed borrowers.
Aadhar Housing provides a variety of mortgage-related loan products, such as loans for purchasing and constructing residential properties, home improvement and extension loans, and loans for the construction and acquisition of commercial properties.
With assets under management (AUM) of Rs 21,100 crore in FY24 and 7 percent market share in the affordable segment, the company boasts a long track record, a well-diversified geographical presence, and a broad customer base.
As of the first nine months of FY24, the company operates an extensive network of 487 branches, including 109 sales offices. These branches and sales offices are distributed across 20 states and union territories, covering around 10,926 pin codes across India.
Since its listing on May 15, 2024, the stock of this housing financier has risen over 24 percent.
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