Reduce Aavas Financiers, target price Rs 1600: Edelweiss Securities

Edelweiss Securities has a reduce call on Aavas Financiers with a target price of Rs 1600 for a duration of 12 months. The current market price of Aavas Financiers is Rs 2285.

Aavas Financiers Ltd, incorporated in the year 2011, is a Mid Cap company with a market cap of Rs 17913.17 Crore, operating in NBFC sector.

Aavas Financiers' key Products/Revenue Segments include Interest, Income From Financial Services, Fees & Commission Income and Income From Sale Of Share & Securities for the year ending 31-Mar-2020.

Investment Rationale
According to Edelweiss Securities, Aavas has all the ingredients for sustained profitable growth--niche customer base, asset capabilities and strong execution. It has easy 18–20 per cent RoE capability, but an equity-laden capital structure drags the number lower.

Edelweiss added, at 6.4x P/BV FY22E, the stock leaves little margin for error as it is priced beyond perfection, especially at only 3.7x leverage, even as uncertainty following second wave has risen.

Financials
For the quarter ended 31-03-2021, the company has reported a Consolidated Total Income of Rs 291.33 Crore, down 6.05 per cent from last quarter's Total Income of Rs 310.08 Crore and up 23.93 per cent from last year same quarter's Total Income of Rs 235.08 Crore. Company has reported a net profit after tax of Rs 87.45 Crore in the latest quarter.

Promoter/FII Holdings
Promoters held 50.2 per cent stake in the company as of Dec 30, 2020, while FIIs held 32.5 per cent, DIIs 7.9 per cent and public and others 9.4 per cent.