Goldman Sachs has changed its stance on Aavas Financiers Ltd. (AAVAS: IN), upgrading the stock from Neutral to Buy and raising the price target to INR2,160.00 from INR1,584.00.
The investment firm highlighted the company's improved growth outlook and expansion of return on assets (ROAs) under its new management team, which they believe is currently not fully recognized in the company's price-to-earnings (P/E) multiples.
The analyst from Goldman Sachs pointed out that Aavas Financiers has shown promising developments that could lead to significant value for investors.
According to their assessment, the company is expected to achieve a compound annual growth rate (CAGR) of 25% in both pre-provision operating profit (PPOP) and profit after tax (PAT) over the fiscal years 2024 to 2027. This growth is anticipated based on an improvement in the cost-to-income ratio by approximately 700 basis points, reaching 39% in FY27E.
The improved financial metrics are attributed to stable margins and controlled credit costs. The firm's analysis suggests that these factors will contribute positively to Aavas Financiers' financial performance in the coming years.
The new price target set by Goldman Sachs implies a 25% upside potential from the stock's current level, indicating a robust confidence in the financial institution's future market performance.
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