Aavas Financiers Ltd. share price target

to opex drag since 24 branches and 939 employees were added in Q4FY25. AuM is guided to grow by 20% in FY26 (vs +18% in FY25). We are factoring an 18% CAGR in AuM over FY25-27E owing to likely increase in competition due to falling interest rates and a higher base. Company expects NIM to improve in FY26 (FY25 5.94%) led by lower competition from banks/HFCs and (2) focus on...

Aavas Financiers (Aavas) reported in-line Q4FY25 financial performance, evident in strong 6% QoQ AUM growth, steady 15bps credit cost, 46bps QoQ dip in 1+ DPD to 3.39% and RoA at 3.3%.

AAVAS Financiers (AAVAS)’s 4QFY25 PAT grew ~8% YOY to ~INR1.54b (in line). FY25 PAT grew ~17% YoY to INR5.7b. NII in 4QFY25 grew 14% YoY to ~INR2.7b (in line).

AAVAS Financiers (AAVAS)’s 2QFY25 PAT grew 22% YoY to ~INR1.48b (in line). 1HFY25 PAT grew 18% YoY to ~INR2.74b.

Aavas Financier’s (Aavas) Q1FY25 performance was partially impacted by seasonality and revised regulatory norms (dated Apr 29, ’24), as reflected in sharp a 36% QoQ fall in disbursements to INR 12.1bn.

AAVAS Financiers (AAVAS)’s 1QFY25 PAT grew 15% YoY to ~INR1.26b (6% miss) and NII grew 8% YoY to ~INR2.45b (in line).

Strong 22% YoY AUM growth in FY24 with an all-time low 1+ DPD portfolio at 3.1%, as on March’24, despite higher attrition owing to top-management change in May’23 and adverse impact on business volume due to tech upgradation, summarises superior execution of business strategies by new management

AAVAS Financiers (AAVAS)’s 4QFY24 PAT grew 13% YoY to ~INR1.43b (10%
beat) and NII rose 7% YoY to ~INR2.4b (in line). FY24 PAT was up ~14% YoY
at ~INR4.9b.

The top management of Aavas Financiers (Aavas) changed in May’23, yet, its H1FY24 and Q2FY24 financial performances have been encouraging and reinforce our view that the new management team would be able to maintain its industry-leading position in AHFC space and deliver 2.5-3% RoA and 15-20% RoE on a steady basis. Notably, disbursements grew 18% QoQ after falling >30% QoQ in Q1FY24 owing to seasonality (Q1 generally being a weak quarter) and IT transformation.

Aavas Financiers Ltd (AAVAS) is a fundamentally strong HFC with best-in-class asset quality, a well-capitalized balance sheet, a healthy growth trajectory and consistently delivering ROAs >3.5%. AAVAS has demonstrated an execution track record by generating strong risk-adjusted returns despite a large self-employed asset mix.

The past six months have been challenging for Aavas Financiers (Aavas) mainly due to top-management change. Despite concerns over its growth trajectory due to the apex-level change as well as IT transformation and NIM compression, the company’s performance in Q1FY24 reinforces our view that it will remain industry-leader in the AHFC space.