Cholamandalam Investment & Finance Company Ltd. share price target

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).

Cholamandalam Investment & Finance Co. Ltd. (CIFC) reported higher-than-estimated operational profitability in Q3FY21.

CIFC's gross stage 3 assets increased by 77bps QoQ to 3.75% (adjusted for Supreme Court direction) and it was better than estimate. Also, restructured assets stood at 2% of loan book; lower than guided in the range of 3-5% is the key positive. Further, Covid19 related provisions (Rs.7.5bn as of dec'20) are more than sufficient on the balance sheet and management guided reversal of the same (excluding Rs.3bn for macro). NIMs improved surprisingly by 50bps QoQ led by change in product mix and lower cost of funds. AUM growth remain strong at 13% YoY (13% Q2FY21) led by growth in disbursements (up 6% YoY). NII grew by 26% YoY led by improvement in NIMs; PPoP grew by 51% YoY. We revised the estimates of AUM growth at 13% vs 10% earlier for...

our FY21 still factors sufficient conservatism in the nature of (a) incremental mere 2% AUM growth (but 16% YoY) in Q4FY21 with normalization coming through post festive demand, (b) 4.6% NPA (c) modest margins at (6.6%). CIFC's continued focus on right product positioning and broad-level strategy on creating financing ecosystem make it a constructive long term bet. 2.7% RoA and 17%+ RoE by FY22 only corroborates our confidence in the business model and hence we reiterate BUY recommendation on the stock with...

We upgrade our target multiple to 2.6x (from 1.9x) and revise to Buy from Hold with a target price of Rs 309 (2.6x FY22E ABV).

CIFC's reported higher profitability than expected, led by better AUM growth (13% YoY vs 10%YoY Q1FY21) and improvement in NIMs. NIMs improved surprisingly by 120bps QoQ led by change in product mix and lower cost of funds. As of 28th Oct, 95% of moratorium customers paid at least one EMI, which is positive for asset quality. Asset quality improved with Stage 3 assets declined by 36bps QoQ to 3% led by better collections and recovery. AUM growth bounced back to 13% YoY (10% Q1FY21) led by lower repayments and better disbursements. NII grew by 23% YoY led by improvement in NIMs; PPoP grew by 45% YoY. We revised the estimates of AUM growth at 10% vs 8%...