Buy Cholamandalam Investment; target of Rs 1550: Axis Direct

By Broker Research

Axis Direct's research report on Cholamandalam Investment
CIFC posted a stellar Q3 with 53% YoY growth in PAT to Rs 2.5 bn (higher than our and consensus estimates). Strong earnings growth was backed by uptick in disbursements (up 55%/23% YoY/QoQ) and improvement in asset quality with ~80 bps QoQ decline in GNPA ratio to 3.7%. AUM growth at 20% YoY was highest in past 15 quarters.

Outlook

Maintain BUY with rolled forward TP of Rs 1,550 (valued at 3.6x FY20 ABV): We continue to like CIFC for its welldiversified vehicle finance (VF) book, voluntary slow-down in home equity (HE) portfolio, investments in tech (that will drive operating leverage) and newer products like trip finance and home loans (which yield results post a couple of years). At CMP, CIFC trades at 3.6x/ 3x FY19E/ FY20E ABV of Rs 356/ Rs 425.

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