Sharekhan's research report on Cholamandalam Investment and Finance Company
Cholamandalam Investment and Finance Company reported strong earnings growth of 31% y-o-y, led by a 36% y-o-y decline in provisions, significantly above consensus and our estimates. AUM growth also exceeded expectations with 31% y-o-y growth, about 3% higher than expectation, driven by strong disbursements growth of 68% y-o-y. New businesses segment – consumer and small business loans contributed 22% to the disbursement mix in Q3. NIM (calculated as a % of average AUM) was lower by 13 bps q-o-q at 6.5% on expected lines. On the positive side, Chola has significantly increased incremental lending rates in the vehicle finance book and the rest of the book is anyway floating rate book. However, we believe there would be further NIM pressure in the near term due to a higher share of floating rate liabilities and lower share of floating rate assets. Gross Stage-2 assets declined by ~115 bps q-o-q to 4.91%, while GS3/NS3 assets fell by 33bps/18bps q-o-q to 3.51%/2.07%, respectively. PCR on Stage-3 assets declined by ~52bps q-o-q to ~41%.
At the CMP, the stock trades at 4.3x/3.6x/3.3x its FY2023E/FY2024E/FY2025E ABV estimates, respectively. We maintain Buy with an unchanged PT of Rs. 900.
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Cholamandalam Investment and Finance Company - 01 -01-2023 - khan