Citigroup has issued a Buy rating for Aadhar Housing Finance with a target price of ₹650, representing significant upside potential from the current market price of ₹479.40. According to reports from The Hindu BusinessLine, the broker hosted MD & CEO and CFO of Aadhar Housing for investor meetings in Mumbai, where key management insights were shared with the investment community.
The company has outlined ambitious growth targets with medium-term AUM trajectory of 20-22% and expectations to cross over ₹50,000 crore milestone within 3 years. As reported by The Hindu BusinessLine, Aadhar Housing plans to achieve spreads to sustain above 5.6% over the medium term while maintaining credit cost guidance of 25-27 basis points. The company expects annual improvement of 40-50 basis points in C/I and 6-8 basis points in cost/assets over the next 3 years.
The company has adopted a dual market approach to effectively manage market dynamics, targeting volume/AUM growth in Urban/Emerging 'A' markets while prioritising value and enhanced risk-adjusted returns in 'B' & 'C' segments. According to the broker's analysis, this strategy provides pan-India presence and deeper coverage that de-risks the company from state-specific growth challenges. The company differentiates itself through scale with granularity, non-conventional diversified distribution, and cost-efficient graded branch structure.
Citigroup projects Aadhar Housing to achieve superior and projected sustainable RoA/RoE of over 4.5%/16.5% over FY25-27E. As reported by The Hindu BusinessLine, the broker uses a two-stage Gordon Growth model to arrive at the target price, assuming cost of equity of 12.2%, medium-term RoEs of 16%, and high growth phase of 10 years with expected growth of 20%. The target price is based on price-to-book of 3.3x 9MFY27E BV.
The broker has identified key risks including build-up of stress in LAP over and above expectations and roll-back from elevated GS3 getting disrupted due to activity slowdown that could lead to growth slowdown. According to The Hindu BusinessLine, these factors could impact the company's growth trajectory and financial performance in the medium term.
