Neutral AAVAS Financiers; target of Rs 1700: Motilal Oswal

Motilal Oswal recommended Neutral rating on AAVAS Financiers with a target price of Rs 1700 in its research report dated October 29, 2023.

Subhash Helgaokar

October 30, 2023 / 14:54 IST

Neutral

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on AAVAS Financiers

AUM grew 22% YoY/5% QoQ to ~INR153b. Disbursements grew 10% YoY and 18% QoQ to ~INR12.6b, but were still below consensus expectations. 2QFY24 PAT grew 14% YoY to INR1.2b (5% beat). NII grew 18% YoY to ~INR2.2b. Other income grew 8% YoY, aided by higher assignment income of INR466m (PY: INR494m) and fee income of ~INR200m (PY: ~INR140m). Cost-to-income ratio moderated to ~45% (PQ: 48%), which led to the earnings beat, despite ~40bp QoQ compression in (calc.) NIM. Opex rose 14% YoY and declined 2% QoQ to INR1.3b. This was primarily because of lower employee expenses, potentially driven by lower ESOP expenses. We model a ~23% AUM CAGR and ~22% PAT CAGR over FY23-26E, with RoA/RoE of 3.6%/16.4% in FY26E.

Outlook

Valuations have declined over the last nine months and the stock now trades at 2.6x Sep’25E P/BV. Before turning constructive, we intend to closely monitor the execution of disbursements/AUM growth. Additionally, we will observe how the IT transformation improves productivity and operating efficiencies for AAVAS. We reiterate our Neutral stance on the stock with a TP of INR1,700 (based on 2.8x Sep’25E BVPS).

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