Buy Sundaram Finance; target of Rs 2000: Centrum Research

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26 Aug, 2025 12:21

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We retain Buy on Sundaram Finance (SUF) with SOTP based TP revised upwards to Rs2,000 (Rs1,740 earlier). The increase in our TP follows a) revision in earnings estimates for the core - asset financing business and b) higher contribution from the subsidiaries following improved profitability and outlook therein. Strong capital position, best-in-class asset quality and superior returns profile continue to remain key strengths. Value un-locking through demerger of non-financial investments into a separate entity could lead to further upside in the stock. Prefer Sundaram Finance in the NBFC space.

SUF has historically traded at a premium to its peers given its market positioning, business model and returns profile. We expect the trend therein to continue and even as the stock is up 25% since our last note in Jan’ 2017; we see room for further upside. Retain Buy with SOTP based TP revised upwards to Rs2,000. Value un-locking in the non-financial investments through the demerger process into a separate entity (and subsequently listing of the entity) could potentially add another ~10% to our existing SOTP (see exhibit 18). Key risks: Lower than expected growth or inability to contain NPA’s at current level.

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