Hold Cholamandalam Investment and Finance Company; target of Rs 1500: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cholamandalam Investment and Finance Company

Q1 disbursements remained flat YoY due to a slowdown in Vehicle Finance/Home Loan/ CSEL. Lower capacity utilization and excess rain in the quarter led to sluggish growth; however company expects a pick-up in H2 led by a positive festive season. Factoring in the same, we build an AUM growth of 22%/ 21% in FY26/ FY27E. We expect NIM to improve supported by expansion in high-yielding new business verticals and lower CoF. Expect opex to remain elevated as the company is in expansion mode (gold loans). Asset quality trends weakened in the quarter, resulting in higher credit cost (1.8%).

Outlook

We factor in the same and revise our credit cost assumptions for FY26/FY27E. We cut our multiple to 3.7x (vs. 4.2x Mar-27 ABV earlier) to arrive at a TP of Rs 1,500. Maintain HOLD.