Target: ₹600
CMP: ₹510.55
We initiate coverage on the largest listed affordable housing financier Aadhar Housing Finance (Aadhar) with a Buy rating and a target price of ₹600. Established in 2010, Aadhar has the longest track record in the affordable housing space with total AUM of ₹21,700 crore. Post-acquisition by Blackstone L.P., the company has made significant progress in terms of corporate governance, growth, efficiency and profitability.
Aadhar has a diversified presence across 21 states, where it aims to go deeper into geographies going forward, this should keep growth healthy and well-balanced.
Despite the onset of the potential interest rate cut cycle, Aadhar’s well-matched and positive ALM mix (78 per cent floating liabilities vs 80 per cent floating assets) should result in margins remaining largely steady; and credit costs remaining benign.
We expect Aadhar to deliver EPS CAGR of 26% over FY24-26 led by: 23 per cent CAGR AUM growth, steady margins, operating leverage and steady credit costs. This entails RoAs of 4.3/4.5 per cent for FY25/FY26. Though suppressed due to IPO infusion of ₹1,000 crore, RoEs will continue to be robust at 17 per cent (vs. 18.4 per cent in FY24).
