Broker’s call: Aptus Value Housing (Buy)

The investment firm has started covering Aptus Value Housing Finance with a 'Buy' rating. They have calculated the company's value at 2.5 times estimated net assets at the end of fiscal year 28, setting a target price of ₹330. Aptus Value Housing Finance outperforms other affordable and prime housing lenders in terms of profitability, with an estimated return on assets (RoA) of 7.8 percent and return on equity (RoE) of 20.4-20.7 percent for fiscal years 27 and 28.

Notably, the company achieved over 20 percent RoE in fiscal year 26 despite a relatively low ticket size and a branch-intensive model. The firm's spread of 9.1 percent stands out as the widest among its peers, indicating robust underwriting and cost management. The net NPA is 1.3 percent, which is higher than its competitors, but the firm anticipates improvement through better collections and a projected 40 percent loan-to-value ratio.

The main risks include slower-than-expected branch expansion, higher delinquencies in the SBL and Karnataka portfolios, and potential yield pressure from increased competition and reduced assignment income. Aptus Value Housing Finance is an RBI-regulated affordable housing lender that caters to self-employed and low-to-middle-income customers in semi-urban and rural regions of South India.

Its primary product offerings include home loans, LAP, and small business loans. As of the first quarter of fiscal year 27, the company operates 372 branches with a total assets under management (AUM) of approximately ₹13,700 crore. Its core operations are primarily in Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka, with recent expansion into Maharashtra and Odisha.