MOSL: AAVAS FINANCIERS (Neutral)-Ability to recover and bounce back will be put to test
AAVAS FINANCIERS: Ability to recover and bounce back will be put to test
(AAVAS IN, Mkt Cap USD2.7b, CMP INR2530, TP INR2820, 12% Upside, Neutral)
- PAT grew 20% YoY, but fell 32% QoQ, to INR599m (in line) in 1QFY22. NII rose 14% QoQ and 29% YoY, while operating profit fell 10% QoQ (7% beat). However, higher-than-expected credit cost of INR170m (est. INR110m) led to the in line PAT.
- Sharp deterioration in 1+dpd to 12.7% (up 620bp QoQ), relative to some of its other peers who have reported their 1QFY22 numbers, could be indicative of the stress that was seen at the time of demonetization and higher proportion of self-employed customers in the mix.
- Given the strength of this franchise, we remain convinced that it can script a gradual improvement in its 1+dpd and GS3 once collections further improve, led by a recovery in economic activity. Our estimates are largely unchanged and we are building in ~50bp/35bp of credit costs in FY22E/FY23E. We maintain our Neutral rating with a TP of INR2,820/share, given that the stock trades at rich valuations of 6.3x FY23E P/BV.
Aavas Financiers Limited, formerly Au Housing Finance Limited, is an India-based housing finance company. The Company is engaged in providing the home loans to the customers belonging to low and middle income segment in semi urban and rural areas. It offers customers home loans for the purchase or construction of residential properties, and for the extension and repair of existing housing units. It also offers other mortgage loans, including loans against property. The Company has developed Aavas Plus, Aavas Refresh and Aavas Winback products. Through Aavas Plus, the Company lends incremental loans. Aavas Refresh is a customer retention strategy for customers who service their loans and whose repayments are reaching completion. Aavas Winback is for customers whose loans are either foreclosed or closed on maturity, or those who did not avail a previously sanctioned loan. Aavas Finserv Limited is the Company's wholly owned subsidiary.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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