Shares of Cholamandalam Investment and Finance Co. gained on Thursday after Jefferies raised the target price for the stock, citing its strong automobile loan franchise and a likely doubling of return-of-assets in the new business segment.
The brokerage maintains a 'buy' rating on the stock, with the target price raised to Rs 1,800 apiece from Rs 1,685 apiece.
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"We see loan growth holding up at 27% in fiscal 2025 despite softer trends in select auto segments. We see multiple tailwinds to net interest margins," it said.
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In view of the likely initiation of the RBI's rate cut cycle in the coming period, Jefferies believes Cholamandalam is better positioned to benefit as compared to its peers. "With 43% of bank borrowings linked to T-bills, gains from easing rates should be more upfront versus peers," it said.
As operations leverage unfolds, new business return-on-assets can rise by 100 basis points, lifting group return-on-assets by 22 basis points, Jefferies added. The earnings per share should grow at a 29% CAGR from fiscal years 2024 to 2027, it said.
Shares of the company rose 1% to Rs 1,549.95 apiece on the NSE. In comparison, the benchmark Nifty 50 opened 0.5% higher.
Cholamandalam has risen by 32.9% during the last 12 months and has advanced by 23.1% year-to-date. The stock's relative strength index stood at 61.7
Thirty out of the 41 analysts tracking the company have a 'buy' rating on the stock, five suggest a 'hold' and six have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential downside of 1.2%.
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