Cholamandalam Investment and Finance Company, a member of the Murugappa Group, increased by over 9% on May 4 following the release of better-than-anticipated profits.
On May 4, after the company released higher-than-expected earnings, shares of Cholamandalam Investment and Finance Company, a member of the Murugappa Group, increased by almost 9%. This accomplishment was substantially enhanced by the rapid growth in disbursals and collections.
Cholamandalam Investment was trading at Rs 960 on the BSE at 9.30 a.m. on Thursday, up 8.3 percent from its previous finish, while the Sensex was up 0.11 percent to 61,262.39 points.
JP Morgan has upgraded the company to ‘overweight’ from ‘underweight’ following solid earnings and boosted its target price to Rs 1,020 from Rs 700 per share. Macquarie has upgraded the stock to ‘outperform’ and raised the target price to Rs 860 per share.
According to Jefferies India, Cholamandalam Investment is their top pick, with a target price of Rs 900 per share, unchanged from its current market price.
However, Elara Securities downgraded the stock to ‘accumulate’ from ‘buy’ and maintained a target price of Rs 930 per share, up 5% from its current market price.
During the March quarter, the company’s standalone net profit increased by 24% to Rs 853 crore, up from Rs 690 crore the previous year.
It also announced that it has increased its market share in both auto finance and other business areas. Total assets under management increased by 36% to Rs 112,782 crore in FY23, up from Rs 82,904 crore in FY22.
Elara, a brokerage firm, forecasts a 25% AUM CAGR in FY23-25, citing macro tailwinds and new growth engines in place.
The ratio of Stage 3 (S3) assets reduced by 50 basis points (bps) QoQ, reaching 3.0 percent, while the ratio of Gross Non-Performing Assets (GNPA) decreased by 74 bps, reaching 4.6 percent (based on Income Recognition and Asset Classification or IRAC). Furthermore, credit costs fell by 25 basis points year on year.
“Taking advantage of macro tailwinds, CIFC has been a consistent outperformer, striking a fine balance between healthy growth and NIM management.
Expect a 25% AUM and a 22% earnings CAGR in FY23-25, with an average NIM of 7% and a healthy return profile (2.6 percent ROA/20% ROE).
“CIFC will now be reckoned as a steady-state compounder story, commanding a rich multiple,” Elara Securities stated in a recent note.