Buy Cholamandalam Investment and Finance Company; target of Rs 1650: Motilal Oswal

Motilal Oswal's research report on Cholamandalam Investment and Finance Company

Cholamandalam Inv. & Finance (CIFC)’s 1QFY26 PAT grew ~21% YoY to INR11.4b (in line). Its 1Q NII grew ~24% YoY to ~INR31.8b (in line). Other income increased ~48% YoY to ~INR6.8b (~16% above est.), primarily driven by upfront assignment income of ~INR1.5b (PQ: INR940m). Opex rose ~23% YoY to ~INR14.5b (in line), and the cost-income ratio declined ~40pp QoQ to ~37.6% (PQ: 38% and PY: ~39%). PPoP grew ~30% YoY to INR24.1b. Management guided for an opex-to-assets ratio of ~2.9- 3.0% over the next few quarters. Yields (calc.) declined ~10bp QoQ to ~14.4%, and CoF (calc.) dipped ~10bp
QoQ to ~7.8%. NIM contracted ~5bp QoQ to ~6.75%.

Outlook

We estimate a CAGR of ~20%/26% in AUM/PAT over FY25-27 for an RoA/RoE of 2.6%/20% in FY27E. Reiterate BUY with a TP of INR1,650 (premised on 3.8x Mar’27E BVPS).