Sundaram Finance, JK Cement, Metro Brands, Ashoka Buildcon, Kolte-Patil Developers Q4 Review: HDFC Securities

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HDFC Securities Institutional Equities

Sundaram Finance - A steady set of results; valuations remain demanding

Sundaram Finance Ltd. reported a steady set of earnings with sustained reflation in net interest margins and muted provisioning (-1bps), offset by lower other income. AUM growth marginally moderated further to +17% YoY (Q3 FY25: 19% YoY; FY24: +27% YoY), driven by subdued disbursements (+11% YoY; +9% YoY for FY25) across segments, except cars and CE segments.

Disbursement uptick remains a key monitorable as the overall commercial vehicle and passenger vehicles cycles remain soft. Sundaram Finance’s product diversification strategy and interest rate reduction environment are likely to aid further reflation in NIMs.

While Sundaram Finance remains a pristine franchise with steady growth and profitability metrics (core RoE of 19% for FY25), current valuations provide limited upside amidst growth headwinds.

We expect moderation in loan growth over FY26-FY27E (16% CAGR vs. 20% CAGR over FY23-FY25). We tweak our FY26E/FY27E earnings estimates for lower cost of funds and maintain Reduce with a revised SoTP-based target price of Rs 4,410 (standalone entity at 3.4x Mar-27 adjusted book value per share; 17% discount to CIFC).

JK Cement - All-round performance: outlook remains bright

We upgrade our rating on JK Cement to Add from Reduce earlier, with a revised target price of Rs 5,740/share (15x Mar-27E consolidated Ebitda). Our positive stance is driven by JK Cement’s continued outperformance on both volumes and margin front. We estimate JK Cement will continue to deliver industry leading 11% consolidated volume CAGR during FY25-27E and the blended unit Ebitda of Rs 1,191/1,275 per MT. These should drive up its RoE/ROCE to 19/17% in FY27E and net debt/Ebitda should cool off to 1.2x in FY27E, thus supporting its valuation multiple rerating.

In Q4 FY25. JK Cement delivered all-round performance – strong traction in the grey cement drove up consolidated volume by 16% YoY and blended unit Ebitda increased to Rs 1,267 (Rs 263/MT QoQ). JK Cement also tightened its operations, leading to negative non-cash working capital, bringing net debt to Ebitda to < 2x in Mar-25E.

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