Buy Cholamandalam Investment & Finance; target of Rs 1767: HDFC Securities

HDFC Securities’ research report on Cholamandalam Investment & Finance

CIFC  ended  FY18  on  a high, with a strong beat in 4Q. The 18% sequential acceleration  in  disbursals  (especially  in  the  Vehicle Finance slice), coupled  with  the  steady  NIM  uptick  (8.70%,  +30bps QoQ) led to a core earnings  beat of ~6%. Though costs were at a multi-qtr high, justification was  visible  in  the  stark reduction in GNPAs to 2.94% (higher incentives paid  for  collection) and the rapid expansion in reach (170 in the past 12 months).


RoAAs  are  set  to expand 15bps over FY18-20E  as  oplev  benefits  flow  in.  With best-in-class return ratios, premium  valuations  are  justified. Maintain BUY with a TP of Rs 1,767 (4x Mar-20 ABV of Rs 442)