MOSL: CHOLAMANDALAM INV & FIN (Buy)- Go to town with the unassailable growth story
​Cholamandalam Inv & Fin:Go to town with the unassailable growth story
(CIFC IN, Mkt Cap USD2.8b, CMP INR1231, TP INR1500, 22% Upside, Buy)
- Cholamandalam Investment and Finance’s (CIFC) 2QFY18 PAT grew 33% YoY to INR2.27b, beating our estimate by 7%, largely driven by stronger-than-expected AUM growth and lower credit costs.
- AUM grew 4% QoQ and 14% YoY to INR365b, driven by 24% YoY disbursement growth. Vehicle finance had a good quarter, with disbursements up a third to INR43b and AUM up 20% to INR257b. LAP disbursements, too, have been recovering from 4QFY17 lows (up 52% since then). We expect overall AUM growth to pick up to 16% by end-FY18 and 18-19% over FY19-20.
- Opex growth of 22% YoY was higher than we had expected (15% YoY growth). Management attributed it to higher expenses on the collections front coupled with some technology investments.
- GNPL ratio moderated 25bp QoQ to 4.46% (seasonal effect), driven by moderation in both vehicle finance and LAP. Provisions made during the quarter were INR832m v/s INR772m in 2QFY17. Credit cost in the HE segment declined from 0.9% in 1HFY17 to 0.6% in 1HFY18, driven by sale of repossessed assets.
Cholamandalam Investment and Finance Company Limited is a diversified non-banking finance company. The Company provides vehicle finance, home loans and corporate mortgage loans, small and medium enterprises (SME) loans, investment advisory services, stock broking and a range of other financial services. The Company focuses on vehicle finance, corporate finance, home equity loans and distribution of financial products. The Company operates from over 530 branches across India. The Company also offers Rural and Agri Loans, which include loans for purchase of tractors and farming equipment; wealth management, which includes mutual funds, fixed deposits and bonds, life and general insurance, and home loan, and securities, which include stock and derivatives, Internet broking, demat services, exchange traded funds and bonds. Its subsidiaries include Cholamandalam Securities Limited, Cholamandalam Distribution Services Limited and White Data Systems India Private Limited.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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