Aptus Value Housing Finance soars 8%; Citi initiates stock hedging

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Aptus Value Housing Finance India rebounded 8% to a BSE high of 321.35 rupees in intraday trading on Thursday, even as broader markets remained under pressure from global indices.

As of 11:30 a.m., the stock was trading 5.6% higher at Rs 314. The counter saw volume of around 74,000 shares compared to its two-week average daily volume of around 49,000 shares on BSE. Meanwhile, the S&P BSE Sensex fell 0.8% to 58,987.

Recently, the Citi group had initiated a hedge on the action, with a “Buy” rating and a target price of Rs 425 per share.

According to the report, Aptus, which operates in the affordable housing niche segment, demonstrated quality underwriting, with cost of credit below 20 basis points pre-Covid and peaking at 86 basis points post-Covid.

The report says pricing power and an efficient cost structure helped the company deliver a healthy ROA (7.4% in FY22), albeit a low average (2X Assets/Equity in June 2022) limits the ROE.

Along with a larger self-employed customer segment, a high share of non-home loans, and high pricing power in its geographies, Aptus is at the forefront of NIM. Additionally, low cost assets lead to higher ROA/ROE.

Any change in management, the impact of expansion into new states on profitability and geographic concentration in certain states are some of the key risks highlighted by the report.

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