'Buy' Cholamandalam Shares Maintains Axis Securities Post Inline Q2 Results On Improved H2 Outlook

After a muted disbursement growth in H1, the management expects a strong rebound in H2. The disbursement momentum in Oct'25 has remained robust. While disbursement growth could likely fall a shade short of the earlier guidance of 10% in FY26, the management does not see a risk to maintaining AUM growth at 20+% in FY26.

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Axis Securities Report

We reiterate our Buy recommendation on Cholamandalam Investment and Finance Company Ltd. with a target price of Rs 1,880/share, implying an upside of 10% from the current market price. We value Cholamandalam at 4.5x FY27E book value (vs 4.1x FY27E BV currently).

After a muted H1, Cholamandalam expects business growth performance across most segments to improve, supported by incremental demand due to GST rate rationalisation.

Disbursement growth in Oct'25 has seen a strong uptick, and the management remains confident of delivering 20+% AUM growth despite a slight miss on its disbursement growth guidance.

While the unfavourable asset quality outcome was on account of extended monsoon and certain operational roadblocks, the management has reiterated its optimism around credit costs peaking out and declining hereon.

We expect the higher credit costs in H1, though expected to trend downwards, would offset the impact of better NIMs (10-15 bps improvement expected in H2) and steady opex ratios.

We expect Cholamandalam's RoA/RoE to settle at 2.4-2.5%/19-21% over FY26-28E.

We pencil in a healthy AUM/NII/Earnings growth of 23/24/28% CAGR over the medium term.

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