Buy AAVAS Financiers; target of Rs 1685: Prabhudas Lilladher

Moneycontrol • 5 days ago

Original source

Key Investment Pillars

  • AUM growth of 17%/18% expected in FY27/FY28E, driven by higher volumes, improving employee productivity, and healthy demand in the affordable housing segment.
  • Spreads to be maintained above 5%, with incremental home loan yields improving by 8-10bps, supporting margins.
  • Operating leverage to improve, driven by higher employee productivity, technology adoption, and improved branch profitability, targeting an opex ratio below 3% and a cost/income ratio below 40%.
  • Benign credit costs, with asset quality remaining stable, and limited exposure to agricultural income-dependent borrowers.

Thesis Validation Checklist

  • Monitor AUM growth, disbursement volumes, and spreads to assess the company's ability to maintain growth momentum and improve profitability.
  • Track operating efficiency metrics, such as opex ratio and cost/income ratio, to evaluate the company's progress in improving operating leverage.
  • Watch for any signs of asset quality deterioration, particularly in the affordable housing segment, and monitor the company's credit cost guidance.