Hold AAVAS Financiers; target of Rs 1560: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on AAVAS Financiers with a target price of Rs 1560 in its research report dated August 06, 2023.

Broker Research

August 07, 2023 / 21:26 IST

Hold

Prabhudas Lilladher's research report on AAVAS Financiers

AAVAS saw a weak quarter as PAT missed PLe by 14% due to (1) softer AuM growth at 23.2% YoY (PLe 25.6%) resulting in lower NII and (2) higher staff cost. AuM growth was affected as disbursals declined by 32.5% QoQ (usually Q1 fall is 15-20%) since a tech platform ‘Salesforce’ was implemented pan India in Apr’23. However, operations stabilized in May and June witnessed 17% MoM growth. AuM growth guidance of 20-25% has been maintained. Spike in employee cost was driven by retirement benefit expenses and normalization of ESOP cost. On employee stability, management suggested that there is no attrition at senior/mid-level while junior level attrition is in-line with industry. While we are watchful of senior level stability, better RoE profile (now 14-15%) could be the next trigger for re-rating which would hinge on stronger AuM growth or operating leverage.

Outlook

We maintain multiple at 3.0x on FY25E ABV and keep TP unchanged at Rs 1,560.

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