Reduce Cholamandalam Investment; target of Rs 1250: Emkay Global Financial

Emkay Global Financial's research report on Cholamandalam Investment

CIFC reported a steady performance in Q3FY24, with higher non-interest income (cross-selling fee income, FLDG income, etc) and lower credit cost helping the company deliver ~2.5% RoA. Despite some planned pull-back in partnership-led unsecured lending, growth in the overall non-vehicle segments led by LAP and home loans (HLs) stayed robust. Going forward, the management remains confident about resilient AUM growth led by non-vehicle finance benefiting from an increase in geographical footprint and product offerings. Considering the Q3FY24 developments, we adjust our FY24-26 estimates which leads to a ~5% EPS cut owing to minor compression in NIM and slight increase in OpEx.

Outlook

We reiterate REDUCE on the stock, with Dec-24E TP of Rs1,250/sh (implying FY25E P/B of 4.5x; reduced from Rs1,350 earlier), as at the current rich valuations, the stock seems to be priced to perfection.