Mehabe score: 7 G Factor: 4 Piotski Score: 4 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 4 and Piotski score of 4.
Description
AAVAS Financiers Limited (Formerly known as “Au HOUSING FINANCE LIMITED”) is primarily engaged in the business of providing housing loan to customers belonging to low and middle income segment in semi-urban and rural areas. #
Main Points
Backed by PE Funds
Aavas is an affordable housing finance company # which was incorporated as a subsidiary of AU Small Finance Bank in 2011. Currently, it is backed by two private equity players – Kedaara Capital and Partners Group # and is led by Sushil Agarwal who was a part of AU Small Finance Bank’s leadership team before Aavas was carved out as a separate entity .Site:AAVASMain Symbol:AAVAS
Stock trades at 2804.0, above its 50dma 2591.12. It also trades above its 200dma 2152.44. The stock remains bullish on techicals
The 52 week high is at 3074.35 and the 52week low is at 1271.65
Price Chart
P/E Chart
Sales and Margin
Strengths
– has delivered good profit growth of 54.60% CAGR over last 5 years
Weakness
– Stock is trading at 9.17 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 12.47% for last 3 years.
– might be capitalizing the interest cost
Competition
– The industry trades at a mean P/E of 29.1x. AAVAS Financiers trades at the industry’s max P/E of 76.06x. AAVAS trades at a P/E of 76.1x
– Industry’s mean G-Factor is 4.6 while the mean Piotski score is 8.0. AAVAS has a G-Factor of 4 and Piotski scoreof 4.
– Average 1 month return for industry is -0.4%. The max 1- month return was given by AAVAS Financiers: a return of 11.64 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 289.0 cr compared to Rs 234.0 cr for period ended Mar 2020, a rise of 23.5%
Operating Profits reported at Rs 76.0 cr for period ended Mar 2021 vis-vis 66.0 for period ended Mar 2020 .
Operating Margins contracted -190.8 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 11.16 compared to Rs 10.92 for previous quarter ended Dec 2020 and Rs 7.65 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 1103.0 cr for period ended Mar 2021 vis-vis sales of Rs 902.0 cr for the period ended Mar 2020, a healthy growth of 18.2%. The 3 year sales cagr stood at 30.7%.
Operating margins expanded to 372.0% for period ended Mar 2021 vis-vis 321.0% for period ended Mar 2020, expansion of 5100.0 bps.
Net Profit reported at Rs 290.0 cr for period ended Mar 2021 vis-vis sales of Rs 249.0 cr for the period ended Mar 2020, rising 14.1%.
Company recorded a healthy Net Profit CAGR of 46.1% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities: Rs -1071.0 cr for period ended Mar 2021 vis-vis Rs -1172.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 13.0% compared to 12.0% over the last 3 Years. – The stock has given a return of 115% on a 1 Year basis vis-vis a return of % over the last 3 Years. – The compounded sales growth on a TTM bassis is 22% vis-vis a compounded sales growth of 31% over the last 3 Years. – The compounded profit growth on a TTM basis is 16% vis-vis a compounded profit growth of 46% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 32.13% vis-vis 31.86% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 9.69% vis-vis 9.57% for Mar 2021
Conclusion
– has delivered good profit growth of 54.60% CAGR over last 5 years – Stock is trading at 9.17 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 12.47% for last 3 years.
– might be capitalizing the interest cost
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 2591.12 and is trading at 2804.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
