Accumulate AAVAS Financiers; target of Rs 1925: Prabhudas Lilladher

Prabhudas Lilladher's research report on AAVAS Financiers

AAVAS saw a weak quarter as disbursal growth fell by 43% QoQ (usually Q1 sees a 25-30% QoQ dip) and overall stress increased. Disbursals were ~17% lower to PLe since the company transitioned to a realization-based model for disbursal recognition to adopt a more conservative approach, also aligning with regulatory expectations. Credit flow for Jul’25 has normalized to Rs5.5- 6.0bn vs avg. Rs3.8bn in Q1’26. While AAVAS has guided for an AuM growth for FY26E of 18-20%, we have factored an AuM CAGR of 17% due to the Q1’26 impact. Stage-3 and 1+DPD saw a blip of 14/76bps QoQ to 1.2%/4.15% due to seasonality; company expects to roll it back in upcoming quarter.

Outlook

We trim multiple on FY27ABV to 2.8x from 2.9x due to lower growth; TP declines to Rs1,925 from Rs2072. Retain ‘ACCUMULATE’.