Cholamandalam Inv & Fin
BSE SENSEX
36,257
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
10,831
CIFC IN
156
177 / 2.5
1761 / 1039
-8/-16/-11
488
46.9
31 January 2019
3QFY19 Results Update | Sector: Financials
CMP: INR1,174
TP: INR1,525 (+30%)
Buy
Margins stable, AUM growth steady across segments
Cholamandalam Investment and Finance (CIFC) reported 3QFY19 PAT of
INR3.04b (+39% YoY), largely in line with our estimate. This was driven by a
stable sequential NIM and cost control.
Disbursements grew at a steady pace of 13% YoY to INR76.5b.
VF
disbursements grew by 11% YoY, largely driven by LCV (+11% YoY) and
3W&SCV (+67% YoY). HE disbursements picked up to 19% YoY. Overall,
AUM growth remained robust at 29% YoY.
Spreads remained stable on a YoY basis, while increasing on a sequential
basis by 20bp to 6.7%.
This was driven by higher share of LCVs and used
vehicles and lower share of HCVs in the product mix, which led to yield
expansion of 50bp QoQ.
However, cost of funds increased 40bp QoQ.
Costs were managed well, which led to an opex growth of 12% YoY. Given
opex growth was slower than income growth, it led to C/I ratio decline of
300bp YoY. Also, credit costs were lower by 20bp YoY to 0.8%.
Valuation and view:
CIFC has a diversified portfolio, both geographically and in
terms of products. It is expanding into new segments like home loans and
MSME financing. With strong branch expansion, focus on new products, and
improvement in the broader economy, we expect high-teens AUM CAGR over
the medium term. However, we look to closely monitor margin trajectory and
asset quality. We maintain our FY19/20E EPS estimates with a
target price of
INR1,525 (2.8x Dec 2020E BVPS). Maintain Buy.
FY19E
4Q
1Q
2Q
3Q
4QE
15,622
16,174
16,716
18,307
15,221
53,953
66,417
7,198
7,989
8,609
9,561
10,415
23,079
36,575
8,424
8,185
8,107
8,746
4,805
30,875
29,842
27.8
23.3
16.8
22.1
-43.0
28.5
-3.3
2
2
1
1
4,102
304
4,106
8,427
8,187
8,108
8,747
8,907
31,179
33,948
26.5
23.4
16.8
22.1
5.7
28.3
8.9
3,779
2,816
2,901
3,158
3,111
12,895
11,986
4,647
5,370
5,207
5,588
5,797
18,284
21,962
19.0
24.3
22.9
28.6
24.7
29.1
20.1
116
983
612
953
902
3,451
3,449
4,532
4,388
4,595
4,635
4,895
14,833
18,513
1,531
1,535
1,549
1,591
1,758
5,092
6,433
3,001
2,853
3,047
3,044
3,137
9,741
12,080
36.7
36.0
49.4
38.7
4.5
35.5
24.0
25.5
29.5
30.9
29.3
21.4
25.5
21.4
8.2
7.4
7.0
7.1
3.8
8.1
7.1
44.8
34.4
35.8
36.1
34.9
41.4
35.3
33.8
35.0
33.7
34.3
35.9
34.3
34.8
di fferent wa y of reporti ng fi na nci a l nos ; FY19 numbers under Ind-AS
(INR Million)
FY2018
FY2019E
Financials & Valuations (INR b)
Y/E March
2019E 2020E
Total Income
34.4
39.7
PPP
22.2
25.9
Adj. PAT
12.2
13.8
EPS (INR)
78.1
88.4
EPS Gr. (%)
25.4
13.2
BV (INR)
394
473
BVPS Gr. (%)
22
20
RoAA (%)
2.5
2.3
RoE (%)
21.8
20.4
Valuations
P/E (x)
15.0
13.2
P/BV (x)
3.0
2.5
Div. Yield (%)
0.6
0.6
2021E
44.2
28.9
15.4
98.4
11.3
562
19
2.2
19.0
11.9
2.1
0.7
FY18
1Q
2Q
3Q
Income from Opera ti ons
12,962
13,503
13,894
Interes t Expens es
6,326
6,562
6,730
Net Interest Income
6,636
6,942
7,164
YoY Growth (%)
19.9
18.4
18.6
Other Op. a nd Other Income
1
1
1
Net Operating Income
6,637
6,942
7,165
YoY Growth (%)
18.4
17.0
17.5
Opera ti ng Expens es
2,315
2,706
2,820
Operating Profit
4,322
4,236
4,345
YoY Growth (%)
29.4
24.4
23.7
Provi s i ons & Loa n Los s es
1,080
1,135
969
Profit before Tax
3,242
3,102
3,376
Ta x Provi s i ons
1,145
1,062
1,182
Net Profit
2,097
2,040
2,194
YoY Growth (%)
26.5
19.3
35.0
AUM Growth (%)
13.5
14.3
19.3
NIM on AUM (%)
7.7
7.8
7.6
Cos t to Income Ra ti o (%)
34.9
39.0
39.4
Ta x Ra te (%)
35.3
34.2
35.0
E: MOSL Es ti ma tes ; * Qua terl y nos a nd ful l yea r nos wi l l not ta l l y due to
CIFC: Quarterly Performance
Y/E March
Research Analyst: Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
| Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542|Shubhranshu
Mishra
(Shubhranshu.Mishra@MotilalOswal.com); +91 22 6129 1540
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.