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Motilal Oswal’s bullish recommendation on Cholamandalam Inv. and Finance

Motilal Oswal, a leading financial services company, has recommended a buy rating on the stock of Cholamandalam Inv. and Finance with a target price of Rs 1350. This recommendation was made in their research report dated August 03, 2023.

Motilal Oswal’s analysis of Cholamandalam Inv. and Finance

According to the research report, Cholamandalam Inv. and Finance (CIFC) witnessed a growth of 28% YoY in its Profit After Tax (PAT) to INR7.3b in the first quarter of FY24. However, this figure fell short of expectations by 18%. The Net Interest Income (NII) of the company increased by 24% YoY to INR18.4b, but it also missed the estimates by 5%. The report highlights that the Net Interest Margin (NIM) contracted by around 30 basis points to 6.7% due to a rise in borrowing costs. The operating expenses of CIFC remained high, resulting in an increase of approximately 160 basis points in the cost-income ratio to approximately 37%. The Pre-Provision Operating Profit (PPoP) grew by 26% YoY to INR13.4b in 1QFY24, missing the expectations by 10%. The Gross Stage 3 (GS3) ratio and Net Stage 3 (NS3) ratio increased slightly by 5 basis points to 3.1% and 1.7%, respectively. The annualized credit costs stood at 1.3% in comparison to the previous year’s 1.5%. The report also mentions that the new businesses accounted for around 23% of the disbursement mix in 1QFY24. Despite higher credit costs in the new businesses, CIFC is expected to be Return on Assets (RoA) accretive from FY25 onwards due to higher yields.

Outlook and AI legalese decoder

Motilal Oswal maintains a positive outlook on the stock of Cholamandalam Inv. and Finance. The stock is currently trading at the price-to-book value multiple of 4.1 times the estimated FY25 earnings. The research report suggests that these premium valuation multiples are likely to sustain or even expand as investors gain more confidence in the company’s execution capability in new product lines without any adverse selection. With the help of AI legalese decoder, investors can better understand the complexity of legal language used in research reports and make more informed investment decisions. This AI-powered tool can decode legalese and translate it into plain English, making it easier for investors to comprehend the analysis and recommendations provided by experts.

Disclaimer: The views and investment tips expressed by Motilal Oswal in their research report are their own and not endorsed by the website or its management. It is advised to consult certified experts before making any investment decisions.

To access the complete recommendations report, click here.

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