Target: ₹350

CMP: ₹283.40

Aptus Value Housing Finance Ltd (Aptus) reported a strong operational performance, a beat across all parameters, while the 56-bps quarter-on-quarter increase in GNPA was the only dampener. The business momentum remained robust with disbursements at ₹525 crore (+113 per cent year-on-year, +1 per cent quarter-on-quarter) which translated into a healthy AUM growth of 30 per cent/7 per cent year-on-year/quarter-on-quarter. 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 per cent on a steady state basis. We expect the book to grow at 26 per cent CAGR over FY22-24E.

On the asset-quality front, GNPA/NNPA inched up to 1.8 per cent/0.9 per cent vs.. 1.2 per cent/0.9 per cent quarter-on-quarter. Barring the impact of the RBI circular, GNPA would have been 1.3 per cent. Provisions remained elevated at ₹10 crore, in line with our expectations. Resultantly, credit costs stood at 71 bps vs. 69/91 bps year-on-year/quarter-on-quarter.

NII stood at ₹179 crore (+45 per cent year-on-year, +6 per cent quarter-on-quarter), ahead of our expectations of ₹170 crore. Opex grew by 16 per cent year-on-year. 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.

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.