Aptus Value surges as Citigroup initiates coverage with ‘buy’ rating

Aptus Value’s business model centers on targeting self-employed customers in the low-income group

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Shares of affordable housing lender Aptus Value Housing Finance surged on September 22 after brokerage firm Citigroup initiated coverage on the stock with a ‘buy’ rating and a price target of Rs 425, implying an upside of 43 percent over the next 12 months.

The brokerage believes the affordable housing financier could provide strong earnings growth in the coming years driven small size and ‘good’ execution track record that should enable a 29 percent annualised growth in assets under management over the next three years.

“Pricing power and efficient cost structure help it deliver healthy ROA (return on asset), though low leverage limits ROE (return on equity),” Citigroup said in a note.

Aptus Value’s business model centres on targeting self-employed customers in the low-income group with average household income of less than Rs 6 lakh in the under-served rural and semi-urban areas of the country.

The company had grown its assets under management by 44 percent on an annual basis over the past five years, which is equal to the growth of Home First Finance and higher than that of Aavas Financier.

“Its core geographies are quite underpenetrated, giving scope for growth, along with geographic expansion,” Citigroup said.

While Aptus Value’s net interest margin is higher than many of its peers, Citigroup expects a 60 basis point decline going ahead because of higher share of home loans and high leverage. The brokerage firm expects return on asset of 7.4 percent and return on equity of 16.5 percent in 2023-24.

“Key risks include senior management change, impact of expansion into new states on profitability and geographic concentration in select states,” Citigroup said.

At 10:05 am, shares of Aptus Value Housing were up 4.8 percent at Rs 311.80 on the National Stock Exchange.

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