'Buy' Cholamandalam Stock Maintains Motilal Oswal, Sees Long-Term Growth Engines Intact

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Motilal Oswal Report

Cholamandalam Investment and Finance Company Ltd. is gradually evolving into a more robust and resilient NBFC—one that is less cyclical, more diversified, and increasingly anchored in stable, secured retail and SME income streams.

The company’s measured approach of curbing exposure to riskier product lines, while simultaneously expanding newer businesses, such as CD and gold loans, underscores its commitment to preserving earnings quality and maintaining balance sheet strength amid a weak macro environment. 

The company is navigating a complex operating environment by reinforcing its core businesses while taking corrective measures in underperforming segments.

A key management priority is improving operational efficiency, with efforts directed toward enhancing productivity and optimizing costs, particularly in its vehicle and home loan businesses.

Cholamandalam trades at 3.8x FY27E P/BV, a premium that we believe is well-deserved and likely to sustain. This reflects the company’s consistent focus on navigating vehicle demand cyclicality while sustaining healthy AUM growth and stable asset quality through a well-diversified product mix.

We expect Cholamandalam to deliver a PAT CAGR of ~25% over FY25-28, with RoA/RoE of 2.7%/20% by FY28. We reiterate Buy with a target price of Rs 1,920 (based on 4x Sep’27E book value per share).

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