Broker’s call: Chola Inv & Fin (Hold)

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Target: ₹1,150

CMP: ₹1,134.60

Cholamandalam Investment and Finance Company’s (CIFC) AUM growth picked up further to 42 per cent YoY vs 40 per cent YoY (Q1FY24) led by strong growth in disbursements (up 47 per cent YoY). Disbursements grew by 47 per cent YoY led by growth across the segments.

NIMs improved by 10 bps QoQ to 7.4 per cent led by increase in yields. Asset quality improved with GS3 at 2.96 per cent vs 3.06 per cent led by better collection efficiency. Also, GNPA (as per RBI norms) stood at 4.07 per cent vs 4.3 per cent; (well below 6 per cent RBI requirement). Management shared the cost of funds have peaked out and expect improvement going forward.

NII grew by 10% QoQ led by rise in NIMs (up 10bps QoQ); PPoP grew by 6 per cent QoQ led by higher operating expenses (up 20 per cent QoQ). However, PAT grew by 5 per cent QoQ led by increase in provisions (up 7 per cent QoQ).

We believe premium valuation should sustain backed by strong growth. With a diverse product portfolio and a widespread distribution network, CIFC is well-positioned to capitalise on the growth potential.