KRChoksey's research report on Cholamandalam Investment & Finance Company
Chola reported disbursements of INR 70.2 bn during the quarter, +44.5% yoy/-12.4% qoq. Disbursements in vehicle finance/VF continued to remain on a strong trajectory, growing 48.3% yoy, helped by demand for HCVs, LCVs and mini-LCVs. Home equity/HE disbursements at INR 9.4 bn grew 27% yoy/16.5% qoq. The management is of the view that the normalcy is starting to return in the small and medium enterprises sector and hence the strong disbursements growth. Guidance is for HE disbursements growth to stay strong (>27%). NII at INR 8 bn grew ~15% yoy with overall NIMs dropping on account of drop in yields.
This coupled with improving operating leverage and asset quality should translate into strong earnings growth. Over 18-20, we expect PAT CAGR of 29%. We estimate ROA of 2.9%/3% and ROE of 22.3%/23.1% for FY19/20. Current capital positioning (tier I at 13.4%, CAR at 18.2%) is comfortable. We value the stock at 4.5x FY20E ABVPS of INR 431.3 (TP = INR 1,941).
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