Motilal Oswal is bullish on Cholamandalam Inv and Fin has recommended buy rating on the stock with a target price of Rs 315 in its research report dated July 31, 2019.
Motilal Oswal 's research report on Cholamandalam Inv and Fin
1QFY20 PAT grew 10% YoY to INR3.1b (6% below our est.). While operating profit was in line, higher credit drove the miss v/s our expectations. CIFC's disbursements grew 22% YoY to INR85.7b (v/s our est. of 7%). In vehicle finance, the company grew in all segments, barring HCVs (down 30% YoY). As a result, AUM was up 6% QoQ/ 27% YoY to INR574b. Home Equity AUM growth of 17% YoY was the highest in the past 11 quarters. NIM (calc.) on AUM compressed 20bp QoQ /60bp YoY to 6.7% as cost of funds increased 10bp QoQ /20bp YoY. Borrowing mix remained largely unchanged, barring debentures (share reduced to 17% from 21% sequentially) and term loans (share increased to 56% from 53% in the previous quarter). Opex grew 24% YoY to INR3.5b. C/I ratio increased ~250bp to 37%. The company opened ~100 branches during the quarter.
However, we look to closely monitor two factors - margin trajectory and asset quality. We upgrade our FY20/FY21 EPS estimates by 2-5% to account for stronger growth. Buy with a TP of INR315 (2.7x FY21 BVPS).
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