- Aptus Value Housing Finance shares rose up to 5.3% following Morgan Stanley's positive outlook
- Morgan Stanley reaffirmed an Overweight rating with a target price of Rs 390 for Aptus shares
- Affordable housing finance sector expected to see 20%-26% disbursement growth by FY27
Aptus Value Housing Finance shares climbed as much as 5% on Monday after Morgan Stanley said the affordable housing finance sector is entering a new phase of earnings and stock return growth.
The stock rose as much as 5.30% to an intraday high of Rs 298.80. By about 11:30 a.m., it traded 2.94% higher at Rs 292.10 apiece, while the BSE Sensex was down 0.27% at 77,354.50.
Morgan Stanley reaffirmed its "Overweight" rating on Aptus Value Housing Finance and retained a target price of Rs 390, implying upside from current levels.
Morgan Stanley Sees Growth Recovery
The brokerage said affordable housing finance companies are likely to see stronger disbursement and loan growth as temporary headwinds ease.
"Disbursement growth and loan growth across AHFCs appear set to accelerate," Morgan Stanley said. It expects disbursement growth to improve to 20%-26% year-on-year in FY27 from 11%-13% in FY26, with first-quarter FY27 disbursements growing 25%-35%.
The brokerage said its base-case outlook assumes that challenges such as U.S. trade tariffs, state-specific disruptions, stress in the microfinance and MSME segments, and irregular weather conditions, which affected growth in FY25 and FY26, have largely eased. It expects assets under management growth to remain at 21%-25% year-on-year.
Asset Quality Remains Stable
Morgan Stanley said asset quality across the sector has remained stable despite concerns over borrower overlap with the microfinance and MSME segments.
"The MFI and MSME stress cycles prompted caution due to borrower segment overlap, but AHFCs continued to report credit costs within their long-term guided ranges, while non-performing loan ratios remained stable," the brokerage said.
It raised its earnings estimates by 1%-5% across its affordable housing finance coverage, reflecting stronger loan growth assumptions. Morgan Stanley expects earnings per share compound annual growth of 17%-20% during FY27-FY29 and return on equity to expand to 16%-21%.
The brokerage also said valuations remain below historical levels despite continued growth in profit after tax and book value per share.
For Aptus Value Housing Finance and Home First, Morgan Stanley said its target valuation multiples remain below their respective five-year averages.
The brokerage identified Aptus Value Housing Finance, Home First and PNB Housing Finance as its preferred overweight picks. It said improving demand for small-cap stocks, pricing power, resilient lending rates, a large addressable market and banks reducing exposure to small-ticket lending support the sector's long-term outlook.
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