Accumulate AAVAS Financiers; target of Rs 2200: Prabhudas Lilladher

Prabhudas Lilladher's research report on AAVAS Financiers

We cut FY23/24/25E earnings by ~2% due to higher opex, as company’s focus would be on 1) digital transformation and 2) 23-25% AuM growth. AAVAS Financiers (Aavas) saw a steady quarter with earnings being exactly in-line at Rs1.07bn. NII beat PLe by 6.6%. While AuM growth at 4.3% QoQ was lower, NIM was better due to higher yields as growth in non-HL was strong at 7.2% QoQ. Opex was a tad higher and would remain elevated given digital focus (outlay of Rs1.2-1.5bn) and likely branch addition of 30-35 branches per annum. We see opex/assets to remain at ~3.3% over FY23-25E (3.2% in FY23). To focus on longterm strategy and day-to-day execution MD/CEO roles are split.

Outlook

Hence, new CEO Mr. Bhinder will focus on people and technology. We trim our multiple from 4.6x to 4.5x on Sep’24 ABV to arrive at a TP of Rs2,200 (earlier Rs2,250). Due to competition Aavas’ multiple could be capped; maintain ‘ACCUMULATE’.