Aavas Financiers Q3 Results Review - Trajectory Improving, But Still Some Way To Go: Motilal Oswal

Motilal Oswal Report

Aavas Financiers Ltd. Q3 FY24 profit after tax grew 9% YoY to ~ Rs 1.2 billion (~10% miss), while its nine months FY24 PAT grew ~15% YoY to ~Rs 3.5b. net interest income grew 6% YoY to ~ Rs 2.2 billion (inline), and other income grew 34% YoY for the quarter.

Aavas Financiers shared that the disbursement run-rate has improved month-on-month, and that it is hopeful of further acceleration in disbursements once the technology transformation program is complete within three-four months.

We model a ~22% asset under management compound annual growth rate and ~20% PAT CAGR over FY23-26E, with an return on asset/return on equity of 3.4%/16% in FY26E.

Valuations have de-rated over the last one year, and the stock now trades at 2.3 times FY26E price/book value.

While Aavas is on an improving trajectory, we would continue to monitor the execution on disbursements/AUM growth and observe how the IT transformation improves productivity/enhances operating efficiencies for Aavas.

Reiterate 'Neutral' with a target price of Rs 1,650 (based on 2.6 times FY26E book value per share).

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