Accumulate Cholamandalam Investment and Finance; target of Rs 1360: Dolat Capital

Dolat Capital’s research report on Cholamandalam Investment and Finance

In our visit note dated 24th Dec 2018, we were confident of a strong performance, even in the crisis. It reported an even better performance. Disbursements grew 13% YoY with vehicles growing 11% YoY, and LAP 18% YoY. A 34% YoY growth in vehicles and a 14% growth in LAP aided a 32% YoY growth in AUM. The negative carry on upfront lines drawn (` 5000 mn) let NIMs down, but we are not perturbed. We have factored a 20% growth in AUM, dragged by weaker demand sentiment in its largest contributing CV business, despite its strong market position.

Outlook

We have also factored a marginal decline in NIMs in FY21 as competitive intensity erode pricing premium in used-vehicles. Maintain Accumulate at a lower multiple.

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