Target: ₹1,678

Target: ₹1,369.85

India’s ₹5,300 crore affordable housing market is serviced by a mere 11 per cent of affordable housing finance companies (AHFC). Aavas Financiers’ management expects this space is set to post a market size CAGR of 32 per cent over FY22-25, backed by long-term structural trends.

Aavas Financiers with an ₹14,200 crore book, dominates with a 2.6 per cent market share as on FY22. It has the potential to reach a market share of 3.8 per cent by FY25.

We are enthused by AAVAS’ steps to stabilise top management and governance, and the cultural shift & the continued disciplined approach to the phygital business and its seasoned book. Risk management taking precedence over aggressive growth expansion will continue to aid asset quality.

A 25 per cent AUM CAGR & a NII CAGR of 20 per cent over FY23-25, a stable 2.8-2.9 per cent opex-to-assets ratio, a 5 per cent spread and an average GNPA of 1 per cent would translate into an earnings CAGR of 27 per cent, with a ROA of 2.9-3 per cent an average ROE of 16-17 per cent over FY23-FY25.

. We lower our TP to ₹1,678 from ₹2,815 as we pare down our multiple to 3.1x FY25 from 5.0x as AHFC are derated. We reiterate Buy.