Accumulate AAVAS Financiers; target of Rs 2300: Prabhudas Lilladher

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Prabhudas Lilladher's research report on AAVAS Financiers

Aavas Financiers (Aavas) saw a good quarter with PAT beat at Rs1.16bn (PLe Rs.0.99bn) mainly led by better NII and asset quality. Due to SARFAESI initiation stage-3 materially reduced QoQ. AuM growth at 20% YoY was in-line and the management suggested that AuM could grow by 20-25% consistently as penetration beyond the top-60 cities is low however asset quality would be preferred over faster growth. The company also intends to arrest the repayment rate by 2-3% with technology support which would protect AuM from run down. Opex intensity may soften and cost to income is targeted to reduce by 2.0-2.5% over the medium term. While Aavas has delivered strong earnings growth with a focus on asset quality valuation at 4.8x FY24E ABV is steep.

Outlook

We lower multiple from 7.5x to 5.0x FY24 ABV and revise TP to Rs2300. Change rating from BUY to ACCUMULATE. Risks: higher slippages

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