Our target price of Rs380 for Aptus is based on a two-stage Gordon Growth model. Key assumptions are: cost of equity of 13.0%, normalized RoE of 18%, growth during stage one 21%, and steady state growth 4%. These give us a target multiple of 3.3x 9MFY27E 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.