Buy This Mid Cap Housing Finance Stock For Target Price Of Rs 350: Axis Direct

Axis Direct in its recent report on Aptus Value Housing Finance Ltd. published on 10 August 2022, has suggested buy the stocks of the company for a target price of Rs 350 apiece. The brokerage sees potential gains of 25% if the stocks of the company are bought at the current market price. Aptus Value Housing Finance Ltd is a mid-cap home finance company. The company has been listed on the exchange in 2022.

Stock Outlook & Returns

11 August, the stock closed at Rs 281.75 apiece, down 0.32% from the previous close. Currently, the stock is trading above Rs 61.65 from its 52-week low and Rs 113.15 below its 52-week high, respectively.

The stock's 52 week low was recorded in June 2022 at Rs 220.10 apiece and the 52 week high was in January at Rs 394.90 apiece, respectively.

The stocks of the company are listed o the exchange in February 2022. Since its listing, its has share price fallen 23.15%. The share in the past 1 week gave a negative return of 2.88% and in the past 1 month, it gave a positive return of 2.38%, respectively. Whereas in the past 3 months, the share price has fallen 5.15%.

The stock's TTM PE ratio is 20.02 and the P/B ratio is 5.07, respectively. TTM EPS is Rs 7.04. Its ROE is 11.14%. It has a market cap of Rs 14,365.90 crore.

Robust Operational Performance, Asset Quality Snag to Ease-off!

Aptus Value Housing Finance Ltd. (Aptus) reported a strong operational performance, a beat across all parameters, while the 56bps QoQ increase in GNPA was the only dampener. The business momentum remained robust with disbursements at Rs 525 Cr (+113% YoY, +1% QoQ) which translated into a healthy AUM growth of 30/7% YoY/QoQ, driven by a 7/2% QoQ growth in the Housing/Business Loans. The management remains confident of ample growth opportunities available in the self-employed segment, especially in the Tier III/IV markets where Aptus is well-positioned. Thus, it remains confident of growing the book at 25-30% on a steady state basis. "We expect the book to grow at 26% CAGR over FY22- 24E," the brokerage said.

On the asset quality front, GNPA/NNPA inched up to 1.8/0.9% vs.. 1.2/0.9% QoQ. Barring the impact of the RBI circular, GNPA would have been 1.3%. The spike in GNPA is owing to slippage from the 30+ dpd pool. The 30+ dpd pool improved to 6.5% from 11.0/9.9% YoY/QoQ and is currently at the lowest levels post-COVID. Though the 30+dpd pool has shrunk considerably, it remains elevated vis-à-vis its peers. Collection Efficiency (CE) stood at 101% vs. 98/103% YoY/QoQ. Taking cognizance of the elevated stress, Aptus is gradually increasing its ECL provision which stood at 92bps vs. 80bps QoQ, resulting in higher credit costs. The restructured book currently stands at sub-1% and the CE in the book has been healthy.

Key Result Highlights

NII stood at Rs179 Cr (+45% YoY, +6% QoQ), ahead of our expectations of Rs 170 Cr. Spreads stood at 9.17% (+14bps YoY, +2bps QoQ). While business momentum has remained strong, thereby aiding NII growth, the transmission of higher rates has been comparatively slower further supporting growth. Opex grew by 16% YoY. The company has stringently managed its Opex despite investments in tech and digital initiatives. "We believe cost ratios are currently at optimum levels with little scope for further improvement. Provisions remained elevated at Rs 10 Cr, in line with our expectations. Resultantly, credit costs (calc) stood at 71bps vs. 69/91bps YoY/QoQ. PAT growth remained healthy at 62/8% YoY/QoQ.

Management Concall Key Takeaways

Asset Quality improvement underway - The 30+ dpd pool declined sharply by 340bps QoQ in Q1FY23. Of this pool, 61-90dpd constitutes ~0.7-0.8% of the pool and is sticky. While the management does not expect any significant reduction in the 61-90dpd pool, with focus on collections, it expects a further improvement in the 0-60dpd pool. Aptus will thus be moving to ~94-95% of its portfolio with 'Nil' overdue over the coming quarters and thus expects to reduce the 1+ dpd pool to ~5% vs. 9% currently. The management has also indicated that it will look to exit FY23 with GNPA/NNPA of ~1.3/0.9%. With possible write-offs from the sticky pool, we expect credit costs to remain higher than pre-COVID levels at ~75bps in FY23E and settle at ~60bps over FY24-25E.

Valuation and Recommendation

Aptus remains well-placed in the high-growth market that exhibits lower competition due to the expertise required to cater to the un/underserved self-employed customers. A large addressable market facilitating ample growth opportunities over the medium term and stable Opex ratios led by the company's lean cost structure, which has translated into the best-in-the industry return profile, underpin the company's premium valuations. While NIM compression over the medium term is imminent, stable Opex and gradually improving credit costs with asset quality stress receding will support strong RoAs. "We broadly maintain our FY23-24E estimates and maintain our BUY recommendation on the stock with a target price of Rs 350/share (4.5x FY24E ABV), implying an upside of 21% from the Current Market Price," the brokerage said.

About - Aptus Value Housing Finance India Ltd.

Aptus Value Housing Finance India Ltd is a Home Loan Company. Aptus has been formed to primarily address the housing finance needs of self-employed, Low and Middle-Income Families primarily from semi-urban and rural areas. Despite the vibrant growth of the housing finance sector especially over the past few years, India still has one of the most severe housing shortages today. The majority of India's population and especially the self-employed lower and middle-income customers from rural and semi-urban areas lack access to housing finance.

Disclaimer

The stock has been picked from the brokerage report of Axis Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.