Expanding Into Odisha And Investing In Digital Capabilities Will Position The Firm For Future Success

Key Takeaways

• Expanding into new markets and enhancing digital capabilities could drive growth and improve operational efficiency, boosting revenue and net margins.
  
• Strengthening asset quality while diversifying borrowing sources supports sustainable profitability and efficient capital management, positively impacting net margins.
  
• Expansion into competitive markets and saturation in key regions could pressure yields, while reliance on capital markets increases exposure to fluctuating interest rates.

Catalysts

Together with its subsidiary, Aptus Finance India Private Limited, operates as a housing finance company in India.

• Expanding operations in untapped markets such as Odisha and Maharashtra, along with increased penetration in existing geographies through new branches, could drive significant disbursement growth and, consequently, an increase in revenue.
  
• Strengthening the company's digital and analytical capabilities, with a focus on innovative channels like customer referral apps and social media, has the potential to lower acquisition costs and improve the efficiency of operations, thus positively impacting net margins.
  
• Continuous investment in technology and human resources, particularly in middle management and new branches, aims to increase productivity and scalability, which should drive higher earnings over time.
  
• The company plans to maintain a strong control over asset quality with an improvement in collection efficiency rates, potentially leading to reduced credit costs and an improvement in net margins.
  
• With the strategy of diversifying its sources of borrowing and maintaining robust capital adequacy, the company positions itself well to sustain profitability while managing cost of funds efficiently, positively influencing net margins and overall earnings.

Aptus Value Housing Finance India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aptus Value Housing Finance India's revenue will grow by 24.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 61.4% today to 57.8% in 3 years time.
• Analysts expect earnings to reach ₹12.9 billion (and earnings per share of ₹25.79) by about February 2028, up from ₹7.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.8x on those 2028 earnings, up from 21.5x today. This future PE is lower than the current PE for the IN Diversified Financial industry at 23.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.49%, as per the Simply Wall St company report.

Aptus Value Housing Finance India Future Earnings Per Share Growth

Risks

• Expansion into highly competitive markets like Maharashtra could pressure yields and impact interest income, potentially affecting net interest margins.
  
• Saturation in established regions like Tamil Nadu may limit branch network growth, affecting potential revenue growth from these areas.
  
• Increasing reliance on capital markets for funding (including NCDs) exposes the company to risks of fluctuating market interest rates, potentially impacting future earnings and net interest income.
  
• Growing employee costs, particularly in collections and middle management, could increase operational expenses, putting pressure on net margins.
  
• High proportion of fixed-rate loans may pose interest rate risk in a changing rate environment, potentially impacting earnings if borrowing costs rise faster than anticipated.

Valuation

• The analysts have a consensus price target of ₹391.733 for Aptus Value Housing Finance India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹460.0, and the most bearish reporting a price target of just ₹305.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹22.3 billion, earnings will come to ₹12.9 billion, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 14.5%.
  
• Given the current share price of ₹304.45, the analyst price target of ₹391.73 is 22.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.