Buy Cholamandalam Investment and Finance Company: target of Rs 740: Sharekhan

Sharekhan is bullish on Cholamandalam Investment and Finance Company has recommended buy rating on the stock with a target price of Rs 740 in its research report dated May 07, 2022.

Broker Research

May 12, 2022 / 11:58 AM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Cholamandalam Investment and Finance Company

Q4FY22 PAT beat our estimate and stood at Rs. 690 crore versus Rs. 584 crore, rising ~184% y-o-y and ~32% q-o-q aided by lower provisioning. The company had provision write back of Rs.17 crore versus Rs. 248 crore in Q3FY22. It clocked strong disbursements growth of ~58% y-o-y and ~22% q-o-q to Rs. 12,718 crore in Q4FY22 led by robust growth in vehicle finance (up by 43% y-o-y) and mortgage book (up by 57% y-o-y). Asset quality improved with stage-III assets at 4.37% in Q4FY22 from 5.85% in Q3FY22, down by ~150 bps q-o-q, due to better collection efficiency. Management stated that there were strong signs of recovery in auto and mortgage segments and new businesses launched in December 2021 too witnessed significant disbursements.

Outlook

The stock trades at 3.6x/2.9x its FY2023E/FY2024E BVPS. We maintain our Buy rating with a revised PT of Rs. 740.