Result ahead of estimates; outlook remains positive
APTUS Q2FY25 earnings came in ahead of our estimates aided by higher-than expected other income and lower Opex, even as credit cost was higher. NII came in-line with our estimates at Rs 2.8bn registering a growth of 21% YoY (6% QoQ). Strong growth in other income (53% YoY / 29% QoQ) was led by fee income (~48% of other income), which grew 83% YoY and 21% QoQ. Thus, OP/PAT came in higher at Rs 2.5bn/ 1.8bn (vs estimates of Rs 2.3bn / 1.7bn) registered a growth of 26% YoY (9% QoQ)/23% YoY (6% QoQ). Credit cost was higher at 41bps (+24bps QoQ) due to higher provisions made as a conservative measure. Yields as well as the cost of borrowing were steady QoQ at 17.4% and 8.7% respectively. NIMs inched up by 9bps QoQ to 11.8%. AUM growth was healthy at 27% YoY / 7% QoQ led by pick up in disbursements (26% YoY / 39% QoQ). Asset quality was steady with GS3/NS3 at 1.3%/0.9%. Management have reiterated their growth guidance and steady trend in asset quality. We estimate a 29% CAGR in AUM to deliver 26% CAGR in earnings over FY24‐26E resulting in RoA / RoE of 7% / 21% in FY26E.
Valuation & recommendation
APTUS reported a healthy quarter led by pick up in disbursements, steady spreads and asset quality. Management remained confident of maintaining strong AUM growth and stable asset quality in FY25. APTUS’s core strengths and prudent underwriting practice provide comfort. At CMP the stock is trading at 3.4x FY26 BV with RoA/ RoE of 7%/ 21%. We maintain our BUY rating on the stock with an unchanged target price of Rs. 425, valuing the company at 4.2x FY26E book value.
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