Buy Cholamandalam Investment and Finance Company; target of Rs 1425: Sharekhan

Sharekhan's research report on Cholamandalam Investment and Finance Company

Credit cost (cal as avg. AUM) declined to 1.1% (vs 1.3% q-o-q) on improvement in the assets quality. GS3 ratio declined to 2.82% as compared to 2.96% in previous quarter. AUM grew at healthy rate of 40% y-o-y/8% q-o-q to Rs. 134 bn (in line with our estimate). Disbursements growth, however, slowed down to 4% q-o-q (vs 7.6% q-o-q in last quarter) due to low growth in new businesses. At CMP, the stock trades at P/BV 4.2x/3.4x to its FY2025E/FY2026E BV estimates.

Outlook

We reiterate our Buy rating on stock with an unchanged PT of Rs. 1,425. PAT grew by 28% y-o-y/15% q-o-q to Rs. 876 crore (4% higher than our estimate) led by lower credit cost. Other income is likely to remain high as the company received insurance brokerage license.