Aptus Value Housing Finance India Ltd. saw its shares climb after Citi initiated a 30-day positive catalyst watch, anticipating significant growth and stable financial metrics. The foreign brokerage firm has set a target price of Rs 350 for the stock, suggesting a potential upside of 31% from its recent closing price.
Disbursement Growth Expected to Accelerate
Citi's analysis points to a sharp re-acceleration in Aptus Value's disbursement growth, estimated at 34% year-over-year in Q1, a substantial increase from 18% in Q4, 11% in Q3, and 3% in Q2. This growth trajectory is a key factor in Citi's optimistic outlook.
The brokerage also highlighted the stock's inexpensive valuations, trading at 1.9 times FY28E book value and less than 10 times FY28E earnings. This valuation is considered attractive given the company's 20% Return on Equity (RoE) profile and expected mid-to-high teens earnings growth.
Financial Performance and Outlook
- AUM Growth: Sequentially, Assets Under Management (AUM) growth is projected to exceed 4.5%, driven by higher Average Ticket Size (ATS), accelerated branch rollouts, and enhanced network productivity. Year-over-year AUM growth is expected to reach 21.5%, moving closer to the guided corridor of 22–24%.
- Asset Quality: Despite seasonal factors, Gross Stage 3 (GS3) and 1+ Days Past Due (DPD) are expected to moderately increase by 13–15 basis points and 40–45 basis points quarter-over-quarter, respectively, to 1.65% and 6.65%. Credit costs are anticipated to remain firmly within the guided band of 0.5% ±10 basis points.
- Spreads: With yields and cost of borrowing remaining stable, spreads are expected to hold relatively steady.
Citi's 'Buy' Rating and Key Risks
Citi maintains a 'Buy' rating on Aptus Value, praising its niche segment focus and robust internal processes that have historically delivered strong, profitable growth. The firm notes Aptus's high Return on Assets (ROA) and RoE, despite low leverage, attributing this to high Net Interest Margin (NIM) and an efficient operating model. Credit costs have also remained low across various market cycles.
However, Citi also identified several key risks that could impede the shares from reaching their target price:
- Increased competition in core geographies, potentially impacting margins and return ratios.
- Senior management changes.
- Adverse impact on profitability due to geographic expansion beyond core states.
- Vulnerability of Aptus's customer segment in a weak economic environment.
- Elevated operating expenses (opex) per asset in Q1 due to salary increments and incentive provisioning.
"With its niche segment focus and strong internal processes, Aptus has delivered strong, profitable growth for a long period. It has among the highest ROA/ROE (despite low leverage) in the AHFC space driven by high NIM and a low-cost operating model. Credit cost has also been low across market cycles. However, incrementally it is facing increased competition in its core geographies, which could impact margins and consequently return ratios going forward," Citi stated in its report.
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