On Tuesday, Jefferies maintained a Buy rating on Cholamandalam Investment and Finance (CIFC:IN) stock while revising the price target downward to INR1,690 from INR1,800. The adjustment follows the company's second-quarter financial year 2025 performance, which reported a profit after tax (PAT) of Rs9.6 billion, a 26% year-over-year increase. This figure, however, fell short of Jefferies' expectations by 3%, attributed to higher operational expenditures.
Despite softer trends in the automotive sector, which are expected to affect automobile assets under management (AUM) growth, Cholamandalam's diversified portfolio is anticipated to bolster a 27% AUM growth in FY25E. The financial services company has also noticed increased stress in certain segments and has accordingly raised its credit cost guidance. Nevertheless, gross non-performing assets (GNPA) are projected to decline in the fourth quarter.
In response to these factors, Jefferies has revised its estimates for Cholamandalam Investment and Finance. Despite the adjustments, the firm anticipates that Cholamandalam will continue to demonstrate robust growth and return on equity (ROE) in the future.
The decision to maintain the Buy rating comes after a significant decline in Cholamandalam's stock price. With the valuation now at 3.7 times the estimated book value for FY26, Jefferies finds the current valuation to be reasonable. This outlook is based on the company's financial results and the potential for healthy growth moving forward.
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