Aavas Financiers, Aptus Value, Home First Finance, Can Fin Homes - Systematix Initiates Coverage With A 'Buy'

Systematix Research Report

We initiate coverage on affordable housing finance companies, viz., Aptus Value Housing Finance India Ltd., Home First Finance Company India Ltd., Aavas Financiers Ltd. and Can Fin Homes Ltd., with a 'Buy' rating.

Our positive view on the affordable housing finance space is premised on factors such as-

1. favorable demographics,

2. rising urbanisation,

3. low mortgage penetration,

4. rising per capita income, and

5. government push to affordable housing, which we believe would continue to boost the demand for housing loans for decades.

Even as these companies together have grown at a compound annual growth rate of 25% over last five years, outpacing Industry growth of 15%, their combined market share remains a paltry 2% versus 40% share of low-ticket size loan (less than 2.5 million) in Rs 29 trillion housing loan industry.

Despite their focus on the affordable segment (Rs less than 1.5 million) and the perceived riskier salaried and self-employed segments in tier-III, IV towns, the profitability and asset quality of these four companies stayed healthy over the years - a testimony to their superior underwriting and processdriven approaches that would continue to drive their performances, in our view. Aptus Value and Can Fin Hmmes are our top picks in the sector.

Key risks:

1. Pressure on net interest margins and growth, arising from higher competition and

2. further rise in cost of funds.

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