Citigroup
Target: ₹350
CMP: ₹267
We open a 30D positive CW on , expecting sharp acceleration in disbursement growth, contained stress pool, and stable spreads.
Disbursement growth is estimated to re-accelerate sharply to 34 per cent y-o-y (vs. 18/11/3 per cent in Q4/Q3/Q2). Q-o-Q AUM growth is expected to breach 4.5 per cent, driven by higher ATS, accelerated branch rollouts, and strengthening network productivity.
YoY AUM growth is anticipated to step up to 21.5 per cent, improving line-of-sight to the guided corridor of 22–24 per cent.
Despite seasonality, GS3/1+ DPD are expected to edge up 13–15bps/40–45bps Q-o-Q to 1.65/6.65 per cent. Credit costs are expected to remain firmly within the guided band of 0.5 per cent (plus or minus 10bps.
With yields and cost of borrowing holding up, spreads are expected to remain relatively stable.
With its niche segment focus and strong internal processes, Aptus has delivered strong, profitable growth for a long period. It has among the highest ROA/ROE (despite low leverage) in the AHFC space driven by high NIM and a lowcost operating model.
Credit cost has also been low across market cycles. However, incrementally it is facing increased competition in its core geographies, which could impact margins and consequently return ratios going forward.
Key risks: Franchise expansion, salary increments/incentive provisioning in Q1 expected to keep opex/assets elevated.