KR Choksey is bullish on Cholamandalam Finance has recommended buy rating on the stock with a target price of Rs 1335 in its research report dated January 30, 2017.
KR Choksey's research report on Cholamandalam Finance
Robust 17% Y-o-Y growth in AUMs backed by traction in both home equity and vehicle finance segment and improving credit costs boosted earnings for the quarter gone by for Cholamandalam Finance (CIFC), in spite of the demonetization drive. While the company adopts cautious stance on LAP that is currently witnessing elevated levels of stress, the underwriting norms have been tightened. Vehicle finance segment reported healthy AUM and disbursements trends with 17% each Y-o-Y growth during the quarter gone by. PV (cars and MUVs), tractor, Shubh, used vehicles and 2-wheelers should continue to dominate strong vehicle finance traction ahead.
Disbursement shown moderate growth due to the impact of demonetization. NIMs were largely stable at 8.4% as expense ratio improved to 3.4% Y-o-Y coupled with stable asset quality, gross NPAs and Net NPAs down to 3.8% and 2.3% Y-o-Y respectively. With continued focus on collections and RoA positions, the company is in a sweet spot. With macro recovery now round the corner and increasing demand for home loan space coupled with right mix of cyclical vehicle finance portfolio, CIFC as one of the strong plays in the retail finance space justifying higher valuations. Maintain BUY.
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First Published on Jan 30, 2017 04:51 pm