The shares of this Non-Banking Financial Company (NBFC) part of the Murugappa Group gained traction on Thursday after Jefferies assigned a buy call with an upside of 35 percent.
Cholamandalam Financial Holdings Limited (CFHL) is a part of the Murugappa Group. The company is a core investment company registered with the RBI and offers vehicle finance, home loans, and loans against property to a range of its customers.
The company’s operational revenue has increased by 44 percent year on year from ₹4,725 crores in Q3FY23 to ₹6,795 crores in Q3FY24, while net profit has increased by 43 percent from ₹720 crores to ₹1,027 crores.
Shares of Cholamandalam Financial Holdings Ltd. have gained an 86 percent increase over the past 12 months and a 2 percent increase so far this year.
The company’s assets under management (AUM) have increased by 40 percent year on year, from ₹95,468 crores in Q3FY23 to ₹1,33,794 crores in Q3FY24.
Disbursements grew by 18% in Q3 FY24 to Rs. 12,354 Cr & 29% in YTD Dec23 to Rs. 35,385 Cr compared to Q3 FY23 & YTD Dec22, respectively. The company has 82.7 percent loan books for the retail segment and 17.3 percent for the commercial segments.
Jefferies gave a buy call on Cholamandalam Financial Holdings Ltd. with a target price of ₹1,400 per share, representing an upside of 35 percent from Thursday’s trading price of ₹1,037 per share.
The brokerage noted that the company’s stock has declined by 15 percent year-to-date but remains optimistic about the company’s potential for healthy growth, despite a less favourable outlook for commercial vehicle loan growth.
Adjusting auto loan rates to counteract the increased cost of funds and maintain consistent net interest margins. Jefferies also noted that their analysis indicates operating expenses relative to assets under management may decrease due to operational efficiency improvements and changes in product mix.
The brokerage anticipates a 30% compound annual growth rate (CAGR) for Return on Assets (RoA) and earnings Per Share (EPS) in the fiscal years 2024-2026. Despite a pullback, the valuation appears to be reasonable.
Written by Omkar Chitnis
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