Aptus Value Home offers a favourable long-term risk-reward at current valuation (2.7x PABV and 16x PE on FY25E), wherein structural business model positives seem underemphasized.
While concerns over stock supply in the longer run are tenable, the apprehensions around management transition and business scalability appear stretched. We view the appointment of Mr. Balaji as MD (erstwhile ED & CFO) as a non-disruptive development with growth/quality execution fairly verticalized and institutionalized at Aptus, and the likelihood of Mr. Anandan guiding strategy even after current term (ending in Dec’24) by being a Non-executive Chairman. Aptus has demonstrated regional diversification/scalability with comparable asset quality across disparate Southern markets. While existing markets can comfortably support 25-30% growth in coming years, the contiguous and calibrated entry/expansion in new states would aid long run prospects.
Structurally, portfolio spread and opex metric should remain in a narrow band underpinned by benefits from niche positioning, scale, tech investments and credit rating. Aptus’ strong customer and property underwriting, and focused collection mechanism gets reflected in low credit cost and GNPLs, and negligible actual loan write-offs. We estimate 27-28% AUM CAGR and 23-24% earnings CAGR over FY23- 26 with RoE crossing 18% in FY26 (without assuming further dividend payouts). At potentially 4-5x leverage in the very long run, Aptus can deliver 22-25% RoE. Reiterate BUY on favourable risk-reward with a 12m PT of Rs350.