Target: ₹380
CMP: ₹325.25
Aptus Value Housing Finance is the most profitable HFC (FY23 RoA/RoE of 8/16 per cent) in India, thanks to its focus on less crowded segments (rural, informal segment, small loan size, high share of non-housing loans), frugal cost structure (lowest cost to income) and best in class asset quality (lowest write-offs).
Aptus has built an in-house cost-efficient model that is difficult to disrupt. A high margin operating segment with cost leadership implies high return ratios.
The key question is scalability and geographic expansion is the answer. Its track-record is good as evidenced by its success in south India. However, with growth in TN slowing, execution in newer states is important. We see growth potential in existing states (primarily Telangana and Andhra; both growing at about 40 per cent y-o-y) and Business Loans vertical which is small (₹1,500 crore as of Sept’23).
Given its strong balance sheet (low credit risk/CRAR @ 71 per cent, Sep’23), Aptus should in our view be looked on a P/E basis. Forecast 23 per cent EPS growth over FY23-FY26. We Initiate Buy on Aptus Housing Finance.
Management transition/success in new geographies are key risks.