Motilal Oswal's research report on Cholamandalam Inv. and Finance
CIFC’s PAT grew 31% YoY to INR6.8b, while NII grew 17% YoY to INR16b in 3QFY23. PPoP rose 13% YoY to INR10.8b. NIM/Core spreads were sequentially stable at 7.0%/6.7%, with an increase in borrowing costs offset by an expansion in yields. 9MFY23 PAT grew 24% YoY to ~INR18b. GS3/NS3 improved ~33bp/20bp QoQ to 3.5%/2.1%, while PCR on S3 decreased ~50bp QoQ to ~41%. Credit costs stood at 0.7% (annualized) v/s 1.4% YoY. Calculated write-offs stood at ~INR2b (~INR2.7b in 2QFY23). Disbursements remained strong and grew 100% YoY to INR455b in 9MFY23. New businesses contributed ~22% to the disbursement mix in 3QFY23. New businesses spawned by CIFC are expected to see an improvement in the disbursement run rate and contribute ~11% to the AUM mix by FY24E. Growth in new businesses could offset the margin compression and help CIFC deliver the guided pre-tax RoTA of 3.5%.
Outlook
We model a disbursement/AUM/PAT CAGR of 16%/21%/23% over FY23/ FY24/FY25. We increase our FY23E EPS by ~5% to factor in lower credit costs and higher loan growth. While we estimate a margin compression of ~40bp in FY24, we reiterate that CIFC has levers on cost ratios and business AUM growth to deliver a healthy RoA/RoE profile of 2.6%/21% in FY25. Maintain BUY with a TP of INR880 (based on 3.9x Sep’24 BVPS).
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