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Strong quarte

JM Financial Institutional Securities Limited JM Financial Research is also available on: Bloomberg - JMFR , Thomson Publisher & Reuters, S&P Capital IQ, FactSet and Visible Alpha Please see Appendix I at the end of this report for Important Disclosures and Disclaimers and Research Analyst Certification. Aptus Value Housing Finance (Aptus) delivered a strong quarter with PAT at INR 1.64bn (+21.2% YoY, +4.1% QoQ) and robust AUM growth (+29.4% YoY, +8.1% QoQ) on the back of healthy disbursements (+44.9% YoY, +26% QoQ). While CoB saw a marginal uptick to 8.64% (vs 8.55% in 3QFY24), yields moved in tandem to 17.35% (vs 17.21% in 3QFY24) resulting in stable NIMs (calc.) at 11.98% (vs 12.25% in 3QFY24). Mgmt. indicated that they expect spreads to remain stable going ahead (currently 8.71%) as they do not anticipate further increase in CoB and thereby yields. Asset quality metrics improved with GS3/NS3 at 1.07%/0.8% (-12bps QoQ, -9bps QoQ) and a steady PCR of 25%. 30+ DPD improved to 5.41% (vs 6.04% in 3QFY24) with credit costs moderating to 45bps (vs 51 bps QoQ). On the back of strong on ground demand for both home loans and small business loans, mgmt. remains confident of being able to achieve an AUM growth of 30% going ahead. Given Aptus’s sustained growth momentum and robust underwriting process, we expect it to continue to deliver on profitability and asset quality metrics going forward. We build an RoA/ ROE of 7.03%/19.9% over FY25/26E. We maintain BUY with a TP of INR 400 (valuing it at 3.8x FY26E BVPS).

 Sustained growth momentum: Aptus’s AUM continues to grow at a robust pace (+29.4% YoY, +8.1% QoQ) on the back of strong growth in disbursements (+44.9% YoY, +26% QoQ). Growth was led by home loans (+9.9% QoQ, +33.9% YoY), followed by LAP (+8.1% QoQ, +38.1% YoY) and small business loans (+2.9% QoQ, +23.3% YoY). Company indicated that disbursements in Tamil Nadu had almost bounced back to normalcy (+9% QoQ) and they expect it to see good traction going forward. Management remains confident of achieving 30% AUM growth, on the back of strong on ground demand for both home loans and small business loans.

 Steady operating performance: Operating profit stood at INR 2.2bn (+20.5% YoY, +4.3% QoQ) led by a) healthy growth in NII (+18.1% YoY, +4.8% QoQ) and b) robust other income (+56.3% YoY, +19.1% QoQ). Opex to assets for the company remained stable at 2.7% (vs 2.67% in 3QFY24). Aptus added 31 branches in FY24 (in line with their guidance) with mgmt. guiding for 35-40 branch additions in FY25. Additionally, mgmt. indicated that significant portion of the additions would be in Karnataka and Telangana. Though CoB witnessed a marginal uptick to 8.64% (vs 8.55% in 3QFY24), yields moved in tandem to 17.35% (vs 17.21% in 3QFY24) resulting in stable NIMs (calc.) at 11.98% (vs 12.25% in 3QFY24). Management indicated that spreads are expected to remain stable going ahead (currently 8.71%) as they do not anticipate further increase in CoB and thereby yields.

 Asset quality metrics remain steady: Headline asset quality parameters improved with GS3/NS3 at 1.07%/0.8% (-12bps QoQ, -9bps QoQ). Credit costs (as % of AUM) moderated to 45bps (vs 51bps QoQ) with a steady PCR of 25%. 30+ DPD saw an improvement to 5.41% (vs 6.04% in 3QFY24) and collection efficiency stood at 100.15% (vs 99.65% in 3QFY24). We build in avg. credit cost of 0.28% over FY25/26E.

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