AAVAS Financiers: Target Price Cut, But Is It Still a BUY?

Author

Satyam Jha | Whalesbook News Team

Detailed Coverage:

Prabhudas Lilladher has released a research report providing an updated outlook on AAVAS Financiers. The company demonstrated strong performance in the recent quarter, attributed to better net interest margins, increased fee and assignment income, and a reduction in operating expenses. Loan disbursal growth has normalized as guided, with expectations for H2FY26 to see a run-rate of Rs6.5-7.0 billion per month, which is projected to yield 17% Assets Under Management (AuM) growth for FY26. Despite a medium-term growth target of 20% per annum, the report cautions that AAVAS Financiers' expanding scale and heightened competition in the affordable housing sector could potentially impede credit flow or pricing power. While the company benefits from favorable funding costs through EBLR linked borrowings, the analysis forecasts lower Net Interest Margins (NIM) for FY27 due to ongoing downward asset repricing. In response, Prabhudas Lilladher has revised the valuation multiple downwards to 2.6x from 2.8x and slightly reduced the target price to Rs1,900 from Rs1,925, rolling forward to Sep’27 ABV. The firm maintains its 'ACCUMULATE' rating.

Impact This report could influence investor sentiment towards AAVAS Financiers, potentially leading to short-term stock price movements. The maintained 'ACCUMULATE' rating suggests a positive long-term view from analysts, but the lowered target price and identified risks like competition and margin pressure warrant investor attention. Rating: 6/10

Difficult Terms: EBLR: External Benchmark Lending Rate - A reference rate for floating rate loans. AuM: Assets Under Management - The total market value of investments managed by a financial institution. Opex: Operating Expenses - Costs incurred in the day-to-day running of a business. NIM: Net Interest Margin - A profitability measure for financial institutions, indicating the difference between interest income and interest paid. ABV: Adjusted Book Value - A financial metric that adjusts a company's book value to reflect a more accurate valuation.