In this article, we will be discussing the 2 stocks that one should keep a close watch on in this calendar year 2022.
2 Stocks to Watch:
The 2 Stocks which we will be discussing in this article are Indian Energy Exchange (IEX) and Aavas Financiers Limited. So let’s talk about them in bit detail:
1) Indian Energy Exchange (IEX):
- Indian Energy Exchange (IEX) is a powerful trading platform and exchange that follows an asset-light model.
- Now, the power demand is increasing significantly also, if we compare the per capita power consumption of India with the global average, then it is as low as one-third of the world’s average.
- Further due to the presence of young demographic dividend, it looks like the consumption of power is expected to increase in the coming period as well.
- Also, the shifting in concept from Fossil Fuels to Clean and Green Energy will act as a great booster for the rising power consumption in the country. Here, the early mover states might turn into ‘Power Surplus’ states, and then they might sell the powers to the states which will be seeking energy or power. So, here at this stage, power trading/exchange could take place between the power surplus states and power deficit states.
- The rise in electricity volumes of IEX also suggests the above trend which has grown by 56% YoY, and 22% sequentially and this is expected to grow more in the future.
- Moving towards the operational efficiency of the company, it records a phenomenal operating profit margin of ~85% due to the asset-light model. There is a continuous improvement in the same as well. Meanwhile, the company also recorded rising volumes.
- Recently the company has announced a bonus issue of 2 shares for every 1 share to the existing shareholders. Due to the bonus issue of shares, the price has come down and now looks at affordable levels from Retail Investors viewpoint and hence more participation of investors can be expected here. Generally, Bonus Issues is considered much better practice than the Shares Split.
- The company has also witnessed increasing in Renewable Capacity share to 25% in Trading, which can go up to 50% by 2030.
2) Aavas Financiers:
- One most important thing to notice in this business is its development of an affordable housing loan book. The average ticket size is around Rs. 8 Lakhs.
- Such companies tend to be aggressive, but the Gross Non-Performing Assets and Net Non-Performing Assets of this company as of the quarter ended 30th September 2021 is at 0.96% and 0.72% respectively, which shows how efficiently they have managed their loans especially affordable housing loans.
- The company is having a Net Interest Margin (NIM) of 6.93% and Return on Assets (RoA) is at 2.4%, and a Spread is 5.73% as of September 2021.
- The funding Mix of the company is as follows: Term Loans (36.8%), Assignment (22.7%), National Housing Bank Finance (23%), and Non-Convertible Debentures (17.6%). This funding mix indicated reduced borrowing costs of the company.
- The Asset Under Management (AUM) of the company is around Rs. 10,000 and its composition based on occupational structure are as follows: Self-Employed Individuals (60.2%) and Salaried Individuals (39.8%). While the break-up of AUM as per loan type, then it is as follows: Home Loan (72.1%), and Mortgage Loans (27.9%).
- The company has recorded an exceptional journey of its AUM creation from Rs. 4,000 Cr. in March 2021 to Rs. 10,000 Cr. in September 2021 amounting to CAGR growth of more than 33%.
What Should Shareholders Do?