Emkay Global Financial's research report on Cholamandalam Investment
In Q1FY24, CIFC continued its strong disbursements and AUM growth, despite a seasonally weak quarter; however, profitability missed our estimates on some pressure on NIM and increased credit cost. Going ahead, margins are likely to improve, with easing cost of funds and higher yielding fixed rate new loans aiding loan book yields and improving credit cost helping overall profitability. Overall, the CIFC’s profitable growth story, powered by its strength in core vehicle finance and accelerated growth in newer segments, stays on course. The planned ~Rs40bn capital raise should improve the capital adequacy by ~4ppts and support stronger growth for 2-3 years.
Outlook
To reflect Q1 developments, we have tweaked our FY24-26 estimates (~3% downgrade in EPS) and reiterate our BUY rating with Jun-24 TP of Rs1,215 (implied FY25E P/BV: 4.7x)
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