Performing a fundamental analysis briefly on AHFL.
Facts:
- It is a HFC retail focused on the low income housing segment (ticket size less than Rs. 1.5 million) and has highest AUM and net worth among segment HFC peers.
- Present in 20 states and UT.
- In FY 23 it had highest number of live accounts.
- Average ticket size was Rs. 1 million in FY 23.
- Loan applications from salaried-customers go through its regional processing unit (“RPUs”), increasing efficiency while those from self-employed customers, which require close understanding of the customer and their cash flows, are managed regionally; this helps in lowering operational costs compared to banks and other HFC where everything is zonal for such customer types.
- Apparently they have some proprietary credit assessment model backed by Blackrock.
- Branch model is something unique for them: On a regional level, it has categorized branches as main and small branches which are hubs and it further penetrate deeper through micro or ultra-micro branches under the ambit of main or small branches. Usually the company establish its presence in a new location with an ultra-micro branch based on the geography, potential and low delinquency trends, and once the ultra-micro branch becomes profitable, it upgrades it to a small or main branch to cater to a larger pool of customers.
- Management team including BOD is with solid credentials and directly supervised by Blackstone as it has 75% stake. Important fact for Blackstone is that they are very much upbeat about real estate financing market in India since last 3 years.
Financial numbers (important only)
- gross AUM has been increasing at almost 18% yoy on 3y basis.
- revenue CAGR on 5y basis is 20%.
- operating profit margin for 5y has consistently been around 75%. Even EBITDA margin is around same for 5y basis.
- net profit CAGR on 5y basis has been 36%.
- long term debt is nil.
- ROCE has been hovering between 40-45% since last 3 years.
- ROE has been between 13-15% since last 3 years.
- cost of funds has been 7.6%.
- GNPA has improved to 1.08% which will reduce credit cost for this year.
- book size recently had reached 21000 crores.
View:
- demand for such loans is at almost 35 trillion rs in India. so i dont business building should be an issue.
- company is going to add 70-75 branches a year and venture to almost 25 states in next 2-3 years.
- they are also going to build books basis assignment and colending going forward.
- disbursements on qoq basis needs to be monitored closely as it has been flat in past for some parts.
- they also attach life insurance loans which is something critical for repayment by family for home loans and they have stated it is almost more than 50% loans.
- liquidity buffers are very good for such HFC by maintaining almost 6-8% consistently.
- sourcing mix is also good.
- government policy is also focused on increasing subsidy for affordable housing. will help them in book building further.
Based on the above, I believe it is a good company to be invested in as it is fairly valued. I think institutional money (including MF inflow) will also follow if performance remains in this manner.
Happy to receive feedback/ suggestions/ discussion etc. Thanks.
[Disclaimer: I am invested in this stock in June 2024 at entry price of 340.]