AAVAS : Going Long

27 Jan

Fundamentals

Pros:

Solid Financials: Aavas Financiers boasts strong financials, reflecting its robust position in the home financing sector. Despite recent challenges, the company's fundamentals remain sound, as confirmed by thorough analysis.

Resilient Mutual Fund Interest: Despite fluctuations in FII and DII holdings, aggressive buying from mutual funds underscores confidence in Aavas Financiers' long-term potential, despite short-term uncertainties.

Experienced Management: The company benefits from a strong and experienced management team, which is crucial for navigating market fluctuations and driving sustainable growth.

Resilience During COVID-19: Aavas Financiers demonstrated resilience during the COVID-19 pandemic, reflecting its ability to weather challenging economic conditions and maintain stability in its operations.

Low NPA Levels: With a focus on mortgage-backed loans to middle and lower-income individuals, Aavas Financiers maintains low non-performing asset (NPA) levels, mitigating risks associated with loan defaults and enhancing investor confidence.

Cons:

Margin Pressure: The company experienced a reduction in profit margins due to factors such as increased borrowing costs and higher competition, leading to a slight fall in interest rates to retain customers and a slowdown in disbursements. However, this is viewed as a temporary phenomenon, with solid fundamentals underlying the business.

Exorbitant Valuation Concerns: Aavas Financiers faced a crash in its stock price partly due to concerns over exorbitant valuation. However, the appointment of a new MD and CEO, Mr. Sachinder Bhinder, renowned for efficiency and leadership, signals a positive trajectory for the company.

Technicals

• Took a position for about 2.5% of the net capital, targeting the channel high, for a potential move of about 24% on the invested capital.
  
  
• Will update further details underneath this post, if any.