Aptus Value Housing Finance India has entered Citi’s 30-day upside Catalyst Watch, with the brokerage reiterating its ‘Buy’ rating and target price of Rs 350, implying an expected share price upside of 31.9%. If one includes an expected dividend yield of 1.5%, Citi sees a total return potential of 33.4%.
Citi said its constructive near-term view is driven by expectations of a sharp acceleration in disbursement growth, stable asset quality, resilient lending spreads and attractive valuations ahead of the company’s quarterly earnings.
“We open a 30D positive CW on Aptus, expecting sharp acceleration in disbursement growth, contained stress pool, and stable spreads,” Citi said.
Citi expects disbursement growth to gather pace
Citi expects Aptus’ disbursement growth to accelerate sharply to 34% year-on-year in the June quarter from 18% in the March quarter, 11% in the December quarter and 3% in the September quarter.
The brokerage expects assets under management (AUM) to grow by more than 4.5% sequentially, supported by higher average ticket sizes, faster branch additions and improving productivity across its distribution network. It also forecasts AUM growth to accelerate to 21.5% year-on-year, improving visibility towards the company’s guided growth range of 22-24%.
“QoQ AUM growth is expected to breach 4.5%, driven by higher ATS, accelerated branch rollouts, and strengthening network productivity. YoY AUM growth is anticipated to step up to 21.5%, improving line-of-sight to the guided corridor of 22-24%,” Citi said.
Asset quality and credit costs likely to remain stable
Citi expects asset quality to remain well contained despite seasonal pressures during the quarter for Aptus Value Housing Finance.
The brokerage forecasts GS3 and 1+ days past due (DPD) to increase modestly by 13-15 basis points and 40-45 basis points quarter-on-quarter to around 1.65% and 6.65%, respectively. It expects credit costs to remain comfortably within the company’s guidance.
“Despite seasonality, GS3/1+ DPD are expected to edge up 13-15bps/40-45bps QoQ to 1.65%/6.65%. Credit costs are expected to remain firmly within the guided band of 0.5% ±10bps,” Citi said.
Stable spreads and inexpensive valuations support the outlook
Citi expects Aptus to maintain stable lending spreads as borrowing costs and portfolio yields remain largely unchanged.
The brokerage also believes the stock’s valuation remains attractive, trading at around 1.9 times FY28 estimated book value and below 10 times FY28 estimated earnings despite generating around 20% return on equity.
“With yields and cost of borrowing holding up, spreads are expected to remain relatively stable. Valuations inexpensive at 1.9x FY28E book and <10x FY28E earnings for ~20% RoE profile and mid-to-high teens earnings growth,” Citi said.
Strong profitability continues to differentiate Aptus
Citi retained its positive long-term view on Aptus, citing the company’s focused affordable housing franchise, disciplined underwriting standards and consistent profitability.
The brokerage said Aptus has delivered strong, profitable growth over a long period and continues to generate among the highest return on assets (RoA) and return on equity (RoE) in the affordable housing finance space despite operating with relatively low leverage.
“With its niche segment focus and strong internal processes, Aptus has delivered strong, profitable growth for a long period. It has among the highest ROA/ROE (despite low leverage) in the AHFC space driven by high NIM and a low-cost operating model. Credit cost has also been low across market cycles,” Citi said.
Competition and expansion remain key monitorables
Citi said increasing competition in Aptus’ core markets could put pressure on margins and return ratios over time.
The brokerage also identified senior management changes, geographic expansion beyond the company’s core states and rising operating expenses linked to franchise expansion, salary increments and incentive provisioning as key risks.
“Incrementally it is facing increased competition in its core geographies, which could impact margins and consequently return ratios going forward,” Citi said.
Conclusion
Citi believes Aptus Value Housing Finance is positioned for a stronger near-term operating performance, supported by accelerating disbursements, improving AUM growth, stable spreads and controlled asset quality. Disclaimer: The institutional equity research ratings, target prices, and multi-year financial projections (including AUM growth, disbursement trends, and RoE/RoA metrics) outlined in this summary of Citi’s report on Aptus Value Housing Finance are for informational and educational purposes only. They do not constitute financial advice, an endorsement, or an offer or solicitation to buy, sell, or hold equity shares.
Investments in affordable housing finance companies are subject to significant market risks, including systemic interest rate cycles, liquidity fluctuations in the banking system, credit defaults within low-income or self-employed borrower segments, competitive lending pressures, and shifting regulatory mandates by the Reserve Bank of India (RBI). Readers are strongly urged to conduct independent analysis and consult a SEBI-registered investment advisor or a qualified financial consultant before making financial choices or investing capital based on these targets.
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