Buy Cholamandalam Investment; target of Rs 950 : Emkay Global Financial

Emkay Global Financial is bullish on Cholamandalam Investment has recommended buy rating on the stock with a target price of Rs 950 in its research report dated February 01, 2023.

Broker Research

February 06, 2023 / 11:51 IST

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on Cholamandalam Investment

Cholamandalam Investment and Finance Company (CIFC) reported Q3FY23 standalone PAT of ~Rs6.8bn (+21.5% QoQ/+30.6% YoY), ~16%/~14% above ours/consensus estimates, primarily driven by lower provisioning in the current quarter. The highest-ever disbursements in the vehicle finance segment drove AUM growth of 8.9% QoQ/ 31.3% YoY. Within vehicle finance, portfolio growth was driven by MUV (+11% QoQ), cars (+8% QoQ), and CE (+9% QoQ). Contrary to our expectations, margins were broadly flat QoQ, with the rise in CoF offset by the NBFC passing on rate hikes on its floating rate loans, higher composition of new business loans coupled with income from treasury operations. Operating expenses continued to remain elevated on account of continued investments in new business verticals coupled with higher variable pay in line with heightened business volumes during the quarter. Asset quality improved QoQ with GS3 and NS3 declining by 33bps and 18bps QoQ to 3.51% and 2.07%, respectively. Credit costs came in at ~0.7%, resulting in earnings growth of 21.5% QoQ/30.6% YoY and quarterly RoA of ~2.8% translating into RoE of ~20.8%.

Outlook

We rollover our estimates to Mar-24E and retain our BUY rating with a Mar-24E TP of Rs950 (earlier Rs860), valuing the company using the excess return on equity (ERE) method. Our TP implies Mar-25E P/BVPS of 3.8x for FY25 RoA of ~2.6% and RoE of ~21.5%.

For all recommendations report, click here