Cholamandalam Investment & Finance Company Ltd. share price target

CIFC PAT grew by 28% YoY led by 26% YoY growth in operating profit. NII grew by 24% YoY despite NIM pressure during the quarter. Elevated credit cost drags the earnings however it is seasonal in nature.

We maintain our BUY rating on the stock and value CIFC at 5.7x FY25E ABV to arrive at a target price of Rs 1,250/share, implying an upside of 14% from the CMP. The premium valuations reflect the superior performance delivery potential by CIFC.

Superb growth yet again; operationally shaky

Superb disbursement streak continues

CIFC surprised yet again on bottomline aided by an in-line performance in disbursals and AUM growth and a stronger earnings performance driven by a sharply lower provisions (28% QoQ decline vs. 50% increase est.) This led to the strong net profit beat. The company management sounded optimistic on delivering growth, especially the new products, which are expected to keep momentum intact in the likelihood of a VF segment slowdown.

Cholamandalam Investment and Finance (Chola) has in the past stood out among peers in terms of business performance across cycles. The most prominent driver for that outperformance was the ability to grow most in a CV upcycle (26% vehicle AUM CAGR during FY16-FY19 vs 13% / 17% / 17% for Shriram Finance / MMFSL / Sundaram, respectively) and it has yet again done the same in FY23 (27% for Chola vs 15% / 23% / 22% for Shriram Finance / MMFSL / Sundaram).