Cholamandalam Investment and Finance Company: Bullish Forecast of Rs 1950 by Prabhudas Lilladher

Cholamandalam Investment and Finance Company Sees 25% YoY Growth in Q4 Disbursements

Prabhudas Lilladher's research report highlights the notable growth in Cholamandalam Investment and Finance Company's Q4 disbursements, which saw a year-over-year (YoY) increase of 25%. This growth was seen across various segments, contributing to a 21% YoY growth in Assets Under Management (AUM). Considering the sustained momentum, Prabhudas Lilladher forecasts AUM growth of approximately 22% in FY27 and 21% in FY28E.

The report also notes that the Net Interest Margin (NIM) is expected to remain stable at around 7%, while higher incremental yields will compensate for an increase in the Cost of Funds (CoF). Additionally, the operating expense ratio is anticipated to improve due to productivity gains. Notably, asset quality has improved quarter-over-quarter (QoQ), with credit costs standing at 1.6%. The report expects further moderation in credit costs in the first half of FY27, with Prabhudas Lilladher building in credit costs of 1.6% and 1.5% for FY27 and FY28E, respectively.

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In light of the positive outlook on growth, credit costs, and operating expense improvement, Prabhudas Lilladher has increased its estimates. The revised forecast for FY28E Price-to-Asset Book Value (P/ABV) multiple is 3.8x, compared to the earlier estimate of 3.7x. The research firm retains its 'BUY' recommendation with a target price of INR1,950.