Neutral AAVAS Financiers; target of Rs 2070: Motilal Oswal

Motilal Oswal's research report on AAVAS Financiers

AAVAS Financiers (AAVAS)’s 4QFY25 PAT grew ~8% YOY to ~INR1.54b (in line). FY25 PAT grew ~17% YoY to INR5.7b. NII in 4QFY25 grew 14% YoY to ~INR2.7b (in line). Other income grew 16% YoY, aided by higher assignment income of ~INR652m (PY: INR551m). 4QFY25 NIM (calc.) expanded ~10bp QoQ to ~6.9%. Reported spreads declined ~5bp QoQ to 4.9% from ~4.95% as of Dec’24. Opex rose ~20% YoY to INR1.7b (~10% higher than MOFSLe). The opex-toavg. AUM stood at ~3.5% (PY: 3.4% and PQ: ~3.1%). We estimate the opexto-avg. AUM will decline to ~2.9% by FY27E from ~3.1% in FY25. Aavas continues to strengthen its distribution network and added 24 branches in 4QFY25. The company will front-end its branch expansion strategy and accelerate new branch additions in 1HFY26. AAVAS will continue to focus on.

Outlook

We estimate ~18%/19% CAGR in AUM and PAT over FY25-27E, with an RoA/ RoE of 3.4%/15% by FY27E. AAVAS trades at 2.8x FY27E P/BV. Valuations factor in the company’s readiness to demonstrate operating efficiencies, now that all major technology transformations have been completed. Reiterate Neutral with a TP of INR2,070 (based on 2.8x Mar’27E BVPS).