Cholamandalam Investment & Finance Company Ltd. share price target

CIFC's asset quality deteriorated (surprised negatively) with gross stage 3 assets increased to 6.79% vs 3.96% QoQ (3.34% YoY). Also, restructured assets increased to 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; July at 114% vs June at 101% vs May at 84%. Further, Covid-19 related provisions stood at 1.0% of AUM which should support credit cost for FY22. NIMs remain stable at 7.6% QoQ. AUM growth declined to 7% YoY (16% FY21) led by slower growth in disbursements (up 1% YoY) and higher repayments. NII...

Q1FY22 earnings stood higher than estimates as lower operating costs (down 28%QoQ due to lower variable pays) offset increased provisions (10%QoQ spike; credit costs: 3.2%). Asset quality deterioration stood stark as Stage 3 at 6.8% (PLe: 4.2%) spiked 283bps QoQ/345bpsYoY due to second wave challenges and delayed SARFEASI resolutions impacting LAP book (Stage 3: 8%). While Stage 2 at 14% also remained elevated, greater share of these...

Cholamandalam Inv & Fin (CIFC) reported 1QFY22 PAT of INR3.3b (11% beat), up 34% QoQ / down 24% YoY. This was on account of strong control over opex (12% below our estimates), despite elevated credit costs (up 10%...

We revise our rating to Hold from Buy with a revised target price of 570 (3.7x FY23 P/ABV).

CIFC's asset quality deteriorated slightly as gross stage 3 assets stood at 3.96% vs 3.75% QoQ (3.8% YoY). However, restructured assets stood at 2% of loan book; lower than guided in the range of 3-5% is the key positive. Further, Covid-19 related provisions increased to 1.6% of assets vs 1.13% (Q3FY21) due to unexpected second wave of Covid-19; earlier management guided for reversal of Covid-19 provisions. NIMs declined by 20bps QoQ led by change in product mix resulted in lower yields. AUM growth improved further to 16% YoY (13% Q3FY21) led by growth in disbursements (up 43% YoY). NII grew by 32% YoY led by improvement in NIMs; PPoP grew by 35% YoY....

Building buffers for near term uncertainty

CIFC reported a 4QFY21 PAT of INR2.4b, 55% miss on higher-than-expected employee expenses and credit costs. The PAT miss belies the healthy onthe-ground operating performance. Disbursements/AUM grew 43%/16% YoY, while asset quality was stable. In FY21, CIFC delivered NII/PPOP/PAT growth of 32-44% YoY. It also increased its total provision buffer by 90bp to 3.6% in FY21. Growth momentum picks up across the board...

Upgrade MMFS to HOLD (earlier REDUCE) on higher EPS expansion Our channel checks indicate that commercial vehicle (CV) finance business is expected to accelerate on the back of healthy demand conditions, anticipated improvement in supply chain and resilient balance sheets of financiers. They suggest (a) disbursements stand 80% of last year levels; ECLGS provides some boost (b) regulatory dispensations (restructuring/ ECLGS) mask true asset quality picture, but CV financiers' balance sheets remain resilient (c) new business asset quality intact, stress in seasoned...

we have revised our EPS estimates upwards by 6.6% and 9.2% for FY21 and FY22. We roll forward to FY23E and maintain BUY with a revised target price of 505 (3.3x FY23 P/ABV).