Dolat Capital's research report on Cholamandalam Investment and Finance
The NBFC reported a strong quarter, with a NII growth of 21% YoY, lower credit costs and improved asset quality. Its opex increased due to investments in 121 new branches. This is expected to improve traction in asset growth next year. We have factored an asset growth of CAGR 18% (reduced our asset growth estimates marginally by 200 bps against vehicles), driven by 15% and 18% in vehicles and LAP, respectively. The PAT is likely to grow at a CAGR 25% over FY19-21E and the ROA is expected to improve 10 bps to 2.3% by FY21E.
The concerns about a slowing CV cycle is expected to be partly mitigated by market share gains in vehicles and traction in home equity. Maintain Accumulate at 3x FY21 E P/ABV (Target of ` 1550).
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