Our target price of Rs358 for Aptus is based on a two-stage Gordon Growth model. Key assumptions are: cost of equity of 14.0%, normalized RoE of 17%, growth during stage one 23%, and steady state growth 4%. These give us a target multiple of 3.3x +2Y BVPS.

Downside risks that could impede the shares from reaching our target price: senior management changes, adverse impact on profitability due to geographic expansion beyond core states and increase in competition in affordable housing. Aptus’ customer segment is more vulnerable in a weak environment. Upside risks that could cause the shares to trade above our target price: sustenance of NIM, higher-than-expected growth and lower-than-expected credit costs.