Cholamandalam Q2 Results Review -AUM Growth Guidance At 25% Versus 25-30% Earlier: IDBI Capital

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IDBI Capital Report

Cholamandalam Investment and Finance Company Ltd. sustained robust assers under management growth (@33% YoY) backed by 17% YoY (H1 FY25) growth in disbursements. Management guided for 25% versus 25-30% AUM growth led by 20% disbursement growth for longer term. Net interest margin declined by 10 bps YoY led by increase in cost of funds.

We expect benefit of lower interest rate environment on account of fixed rate vehicle finance book. Asset quality deteriorated due to seasonality with gross stage III at 2.83% versus 2.62%. NII grew by 42% YoY; however, pre-provision operating profit grew by 35% YoY led by decline in other income (down 52% YoY). PAT grew by 26% YoY led by higher provisions (up 56% YoY).

We have revised estimates downwards slightly by 1% EPS FY26E on account of lower AUM growth. We maintain “Buy” with a new target price of Rs 1,560 (earlier Rs 1,632) based on price/book value of 4.3 times (earlier 4.5 times) FY26E as growth guidance revised lower.

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