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Dolat Capital Report
Aavas Financiers Ltd. reported weak net interest income growth at 19% YoY (-2% QoQ) led by sequential decline in yields. Lower opex however limited impact on profit after tax (Cost/assets declined to 3.5% versus 3.9% in Q1).
Assets under management growth was in-line at 5% QoQ and 22% YoY. Yield decline was driven by both retention of existing customers and new customers coming in at lower rate.
Aavas Financiers' asset quality metrics were marginally higher (stage 3% up 4 bps QoQ), partly led by seasoning of non-home loan book.
We downgrade earnings by ~4% for FY24/25E led by lower spreads versus earlier. Rolling over to September-25E, maintain 'Accumulate' with target price of Rs 1750, valuing housing finance company at 2.9 times price-to-book value against return on asset/return on equity of 3.6%/16%.
Assigned multiple is lower versuss peers given its relatively modest growth and profitability metrics.
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