ICICI Securities research report on Aavas Financiers
The top management of Aavas Financiers (Aavas) changed in May’23, yet, its H1FY24 and Q2FY24 financial performances have been encouraging and reinforce our view that the new management team would be able to maintain its industry-leading position in AHFC space and deliver 2.5-3% RoA and 15-20% RoE on a steady basis. Notably, disbursements grew 18% QoQ after falling >30% QoQ in Q1FY24 owing to seasonality (Q1 generally being a weak quarter) and IT transformation. It has successfully rolled out and stabilised phase I of SalesForce and Oracle Fusion (ERP-GL) went live in Sep’23. The new Loan Management System on Flexcube is currently under testing and migrations.
Outlook
With improved visibility on management stability, its focus on tech-driven processes and operating leverage, we maintain BUY with an unchanged target price of INR 1,800, valuing the stock at 3.5x on Sep’24E BVPS.
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