On Tuesday, Cholamandalam Investment and Finance (CIFC:IN) shares received an updated price target from Jefferies, indicating a positive outlook for the company's financial performance. The price target was raised to INR1,685.00 from INR1,525.00, while the firm retained a Buy rating on the stock.
The company's first-quarter performance for the fiscal year 2025 showed a profit after tax (PAT) of Rs9.4 billion, marking a 35% year-over-year increase. This figure slightly exceeded Jefferies' estimates by 3%, attributed to a combination of stronger net interest income (NII) and lower operating expenses, which helped mitigate the impact of higher provisions.
Cholamandalam Investment and Finance is expected to achieve a 28% growth in assets under management (AUM) for FY25, supported by its diversified portfolio in both the automotive and non-automotive sectors. Analysts at Jefferies forecast an improvement in net interest margins (NIMs) and a decrease in operating expenses relative to AUM throughout FY25-27E.
Despite a quarter-over-quarter rise in gross non-performing assets (GNPA) and credit costs that were higher than anticipated in the first quarter, the outlook remains positive. The firm anticipates a reversal of these trends in the second half of the fiscal year.
Jefferies projects that Cholamandalam Investment and Finance's earnings per share (EPS) will grow at a compound annual growth rate (CAGR) of 29% and that the return on assets (ROA) will increase over the period from FY24 to FY27E. Based on these expectations, Cholamandalam remains one of Jefferies' top non-banking financial company (NBFC) picks.
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