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Jan 29, 2013, 06.11 PM IST | Source: Moneycontrol.com

Buy Cholamandalam; target of Rs 307: Firstcall Research

Firstcall Research is bullish on Cholamandalam and has recommended buy rating on the stock with a target of Rs 307 in its January 26, 2013 research report.

Firstcall Research is bullish on Cholamandalam and has recommended buy rating on the stock with a target of Rs 307 in its January 26, 2013 research report.
 
“The group set up Cholamandalam Investment and Finance Company Ltd (CIFCL) incorporated in 1978 with the primary objective of offering asset finance through leasing and hire purchase to corporate and then to retail customers. It has since evolved itself into a large, composite financial services organization. Owing to Murugappa Group's pre-eminent position in the industry and the consumer equity that it had painstakingly built, the horizon offered opportunities in the financial sector. To harness this, Today, Cholamandalam Investment and Finance Company Ltd (CIFCL) offer stock broking, mutual fund and investment advisory services through its subsidiaries. Ever since its inception and all through its growth, the company has kept a clear sight of its values.”
 
“The basic tenet of these values is a strict adherence to ethics and a responsibility to all those who come within its corporate ambit - customers, shareholders, employees and society. The Company that commenced business as an equipment financing company has now emerged as a comprehensive financial services solution provider that offers vehicle finance, business finance, home equity loans, stock broking and distribution of financial products to its customers. The Company operates from over 350 branches across India with assets under management over Rs.10000 Crores. The subsidiaries of Cholamandalam include Cholamandalam Securities Limited (CSec) & Cholamandalam Distribution Limited (CDSL). Credit rating upgraded by ICRA (from [ICRA] AA- to [ICRA] AA).”
 
“The Company that commenced business as an equipment financing company has now emerged as a comprehensive financial services solution provider that offers vehicle finance, business finance, home equity loans, stock broking and distribution of financial products to its customers, reported its financial results for the quarter ended 31st Dec, 2012. The third quarter witnesses a healthy increase in overall sales as well as profitability on account of increasing branch networks across the India. The company’s net profit jumps to Rs. 815.10 million against Rs. 405.60 million in the corresponding quarter ending of previous year, an increase of 100.96%. Revenue for the quarter rose by 40.65% to Rs.6689.70 million from Rs.4756.20 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.6.15 a share during the quarter, registering at 80.85% increase over previous year period. EBITDA is Rs. 5013.90 millions as against Rs.3446.00 millions in the corresponding period of the previous year.”
 
“At the current market price of Rs 272, the stock P/E ratio is at 10.89 x FY13E and 7.57 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.24.99 and Rs.35.93 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 39% and 78% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.47 x for FY13E and 5.26 x for FY14E. Price to Book Value of the stock is expected to be at 2.08 x and 1.63 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 307 for medium to long term investment,” says Firstcall Research report.

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