Cholamandalam Investment & Finance Company Ltd. share price target

Cholamandalam Inv. and Fin (CIFC) reported 3QFY22 PAT of INR5.24b (8% miss), down 14% QoQ / up 28% YoY. Despite in-line NII/opex/PPoP, this miss was on account of higher-than-estimated credit costs of INR2.5b...

We maintain a BUY rating on the stock with a target price of 720 (4x FY24 P/ABV).

Results a mixed bag; Growth returned

Q3FY22 earnings stood lower than our estimates, largely due to elevated provisions (grew ~4x QoQ; credit costs:1.4%). Asset quality improvement stood marginal as Stage 3 at 5.9% (PLe: 7.0%) down mere 31bps QoQ as Stage 2 at 10.4% vs 12.7% in Q2FY22 (restructured book at ~6%) still stands elevated. Opex grew 44.2% YoY and is expected to remain elevated as CIFC...

We recommend a BUY with a target price of 690 (3.9x FY24 P/ABV)

CIFC's restructured assets increased to 6.9% vs 5.4% of loan book; higher than its peers which is the key concern. However, Management is quite confident of recovery in coming quarters which is visible in improvement in collection efficiency; Oct at 116% vs Sept at 115%. Asset quality improved with gross stage 3 assets declined to 6.16% vs 6.79% QoQ (2.98% YoY). Further, Covid-19 related provisions stood at 1.0% of AUM which should support credit cost for H2FY22. NIMs improved by 10bps QoQ to 7.7%. AUM growth further declined to 4% YoY (7% Q1FY22) led by higher repayments although strong growth in disbursements (up 35% YoY). NII grew by 11% YoY led by...

Core spreads declined by 15bp QoQ and 25bp YoY to 7.5%. Other income was up 29% QoQ, in line with the growth in disbursements. Asset quality improved with a decline of ~200bp QoQ in S2+S3 loans. Incremental restructuring of ~140bp in 2QFY22 was well within the...

Our extensive channel checks across first time buyers, small & large fleet operators and credit heads are suggestive of a bleak 9MFY22 for CV financiers. While lockdown impositions stand behind and collection efficiencies have picked up (avg. 90%), the repayment capabilities of driver/owner, small fleet operators continue to remain weak. While festive season demand is building up, fleet operators expect mere 10-15% business growth uptick from current levels and the same is function of improved consumption trends. Immediate concerns such as pandemic related...

We maintain HOLD with a target price of 570 (3.7x FY23 P/ABV)