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Sharekhan Recommends Buy Rating on Cholamandalam Investment and Finance Company with Target Price of Rs 1425

Sharekhan’s positive assessment of Cholamandalam Investment and Finance Company

Cholamandalam Investment and Finance Company (CIFC) is projected to experience substantial growth in assets under management (AUM) across various product categories, driven by robust disbursement momentum in its non-vehicle finance portfolio. The Company is expected to maintain a healthy net interest margin (NIM) of over 7.0% through the financial years 2025 to 2026, supported by improved product mix, re-pricing of fixed-rate vehicle loans, and a potential plateauing of credit cost. Management anticipates a modest impact of the Reserve Bank of India’s amended risk-weight norms, with the capital adequacy impact expected to be limited to approximately 15-20 basis points.

Future Prospects

Sharekhan is optimistic about CIFC’s capacity to achieve leading industry growth, coupled with a strong NIM and controlled costs, which are likely to boost its earnings trajectory. The Company’s profit after tax (PAT) is forecasted to grow at a compounded annual growth rate (CAGR) of 31% during the financial years 2023 to 2026, potentially driving a 20 basis point expansion in return on assets (ROA) to around 2.9%. At the current market price (CMP), the stock is trading at a price-to-book value ratio of 4.5x/3.6x based on Sharekhan’s estimates for the financial years 2025 and 2026, respectively. Sharekhan maintains a Buy rating with an upgraded price target (PT) of Rs. 1,425 for the stock.

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Cholamandalam Investment and Finance Company – 23 – 12 – 2023 – khan

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