Accumulate AAVAS Financiers; target of Rs 2072: Prabhudas Lilladher

Prabhudas Lilladher's research report on AAVAS Financiers

AAVAS saw a mixed quarter; while NIM inched up by 8bps QoQ and was 15bps ahead of PLe at 6.36% due to lower cost of funds, PPoP was a 3.2% miss owing to opex drag since 24 branches and 939 employees were added in Q4FY25. AuM is guided to grow by 20% in FY26 (vs +18% in FY25). We are factoring an 18% CAGR in AuM over FY25-27E owing to likely increase in competition due to falling interest rates and a higher base. Company expects NIM to improve in FY26 (FY25 5.94%) led by lower competition from banks/HFCs and (2) focus on customers in Rs<1.5mn bucket as they are less interest rate sensitive.

Outlook

Opex to assets has been controlled well; it has reduced by 25bps YoY to 2.77% in FY25. AAVAS aims to reduce opex to assets by 10-20bps every year. Stock has runup and is valued at 2.9x; we maintain multiple at 2.9x but as we roll forward to Mar’27 ABV, our TP increases to Rs2,072 from Rs1,900. Retain ‘ACCUMULATE’.