Buy Aptus Value Housing Finance India Ltd For Target Rs.400 - IIFL Securities
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Superior execution
Aptus Value Housing (APTUS) is a niche, affordable-housing finance player with expertise in the self-employed/LIG segment (72/73% of AUM) and strong presence in the South. APTUS focusses on Tier III/IV locations (rural contributes ~66% of AUM) and ~40% of its customers are New To Credit, which helps it to have better risk pricing (yields of ~17%). APTUS has industryleading profitability (ROA of ~7.5% in FY22ii) with superior margins (12%+) and a frugal operating-expenses structure (~20% CIR). Its 100%, in-house ‘from-origination-to-collection-torecovery’ model helps it enjoy best-in-class asset quality. We expect APTUS to report ~28/23% AUM/PAT Cagr over FY22-25ii. With a multi-year growth opportunity, solid business foundation and strong capitalisation, we expect APTUS’ superior performance to continue in ensuing years. We initiate coverage with a BUY and a target price of Rs400/share (5x FY24ii P/B).
Specialised financier with focus on granular loans: APTUS focusses on highly granular Home Loans (HL), Loans Against Property (LAP) and Business Loans (BL) with an average ticket size, at disbursement of ~Rs700k and LTV of ~40%. It has developed 60+ customer profiles in the self-employed segment, to assess its customer profile.
Superior profitability, leverage to improve ROEs: APTUS enjoys bestin-class profitability with ROA of 7%+ and superior yield/margins of ~17/12%, an optimal cost structure (20% CIR) and low credit cost (~15bps over FY19-21). The company’s rating was recently upgraded which should off-set pressure on yields due to competitive pressures and higher share of fixed rate AUM (~80%) in ensuing years. APTUS’ average ROA over FY18-9MFY22 stood at ~6.5% and is expected to be ~7.3% over FY22-25ii, partially helped by capital raise benefit.
Deserves premium; initiate with a BUY: APTUS’ strong presence in the underserviced & expanding affordable housing finance segment, difficult to assess self-employed segment, impeccable asset quality, superior profitability and strong capitalisation would ensure premium valuation sustains ahead. Presence in the deep rural segment should help mitigate competition in the near-to-medium term. We expect ROA/ROE of 7.0/15.9% by FY25ii. Initiate coverage with a BUY.
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