Citigroup initiated coverage on the stock with a buy rating and a price target of Rs 450, implying an upside of 43 percent over the next year.
The affordable housing financier could provide strong earnings growth in the coming years driven small size and good execution track record that should allow a 29 percent annualised growth in assets under management over the next three years, according to the brokerage.
Citigroup said in a note thatPricing power and efficient cost structure helps it deliver a healthy Return on Assets.
In the under-served rural and semi-urban areas of the country, the business model of Aptus Value focuses on targeting self-employed customers in the low-income group.
Over the past five years, the company's assets under management have grown by 44 percent, which is equal to the growth of Home First Finance.
The core geographies are underpenetrated, giving scope for growth.
Citigroup expects the net interest margin to decline because of higher share of home loans and high leverage. Return on assets is expected to be 7.4 percent and return on equity is expected to be 16 percent in the next twenty years.
Senior management change, the impact of expansion into new states on profitability and geographic concentration are some of the key risks, according to Citigroup.
At 10:00 am, shares of Aptus Value Housing were up 4% at Rs 311.80 on the national stock exchange.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.