Target: ₹1,050
CMP: ₹926.85
Cholamandalam Investment and Finance Company’s (CIFC) AUM growth picked up further to 40 per cent YoY vs 38 per cent YoY (FY23) led by strong growth in disbursements (up 50 per cent YoY). Management guided for 20-25 per cent CAGR for next 3- 5 years.
Asset quality remains stable with GS3 at 3.06 per cent vs 3.01 per cent led by better collection efficiency. Also, GNPA (as per RBI norms) stood at 4.3 per cent vs 4.6 per cent; (well below 6 per cent; RBI requirement). NII grew by 30 per cent YoY led by decline in NIMs (down 70bps YoY); PPoP grew by 26 per cent YoY led by higher operating expenses (up 36 per cent YoY). However, PAT grew by 28 per cent YoY led by increase in provisions (up 25 per cent YoY).
At CMP the stock is trading at premium valuation of 5.1x and 4.1x for FY24E and FY25E P/BV. We believe premium valuation should sustain backed by strong growth. With a diverse product portfolio and a widespread distribution network, CIFC is well-positioned to capitalize on the growth potential.
We have revised estimates upwards (up 11 per cent EPS FY25E) led by strong growth and maintain “Hold” with a target of ₹1,050 (earlier ₹960) based on P/BV of 3.9x FY25E (Earlier3.7x) as growth prospects remain strong.