On Tuesday, September 3, shares of Aadhar Housing Finance Ltd. were up as much as 5%. After domestic brokerage Kotak Institutional Equities gave the stock a 'Buy' rating, the increase was seen. According to its price target of Rs.550, the stock could rise by 41% from Monday's closing levels.
According to the brokerage, Aadhar stands out from the majority of its less expensive competitors because of its larger balance sheet, longer duration, and superior return on equity.
On the other hand, its loan growth from FY24 to FY27 at a compound annual rate of 21% is more comparable to mature housing finance companies than to smaller affordable HFCs that are growing quickly.
With assets under management (AUM) of 21,100 crore in FY24, a 7% market share in the affordable segment, a long history, and a well-diversified geographical presence and customer profile, Aadhar is a significant affordable HFC.
A 21 percent CAGR in AUM is anticipated to be supported by its multipronged expansion strategy (FY24-27), which includes expanding penetration through a variety of branch formats and the industry-first Aadhar-mitra initiative.
During FY24-27E, Kotak anticipates that Aadhar will achieve a CAGR of 22% in earnings per share as a result of 21 percent growth in AUM, near-stable spreads, higher fees, and consistent improvement in operating leverage. After a decrease caused by the IPO in the first half of this fiscal year, the return on equity is expected to return to the high teens, as core profitability (4.4-4.7% RoA) remains strong and leverage gradually increases. In addition, Kotak has listed a few risks, such as a lower net interest margin or growth as a result of increased competition in larger centers or from large HFCs interested in affordable housing. The business likewise expressed that there is a gamble to resource quality from rising portion of independently employed and complications of cross-default and cross speed increase statements in credit arrangements.
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