Buy Cholamandalam Investment and Finance Company; target of Rs 1881: Prabhudas Lilladher
Prabhudas Lilladher is bullish on Cholamandalam Investment and Finance Company has recommended buy rating on the stock with a target price of Rs 1881 in its research report dated August 29, 2018.
September 18, 2018 / 01:10 PM IST
Prabhudas Lilladher's research report on Cholamandalam Investment and Finance Company
We initiate coverage on CIFC with BUY recommendation given that the company has doubled its AUMs defying business cycles, GNPAs averaged at <3% levels (barring demo impact in FY17) translating into steady 17%+ RoE's for past five years. We expect current cyclical recovery to enable 15% CAGR in CV volumes aiding CIFC to grow its AUM at 20% CAGR over FY18-20. Lower credit costs at 80bps and improvement in HE business will enable 27% PAT CAGR over same period. We expect premium valuations to sustain on the back of CIFC's diversified vehicle finance book, secular home equity and resilient balance sheet.
We assign a P/ABV multiple of 4.2x FY20E and arrive at a price target of Rs1,881. BUY.
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