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Cholamandalam Investment (CIFC) - Qtr. Update - Dated - April 29, 2013




Axis Capital Limited


30 Apr 2013





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Maintain BUY with TP of Rs 341 (1.8x FY15E ABV) – upside of 28% Management targets to achieve RoA of ~3% over next three years from current ~2% led by improving margin (focus on high yielding segments like Used CVs and Tractors) and a maturing branch network. CIFC has added ~1,400 employees in Q4FY13 and new product lines in FY13 to meet future growth requirements. Management also plans to add 75 branches in FY14. While growth is on track and momentum is likely to sustain, our estimates remain conservative as we factor in risks involved with new product lines along with increasing competition. We will revisit our estimates once we see signs of comfort in new product launches. At CMP of Rs 266, the stock trades at 1.7xFY14E ABV of Rs 156 and 1.4x FY15E ABV of Rs 189. Q4FY13 results highlights CIFC reported continued momentum in disbursements, stable NIM, and healthy asset quality in Q4FY13. PAT at Rs 858 mn (our est. Rs 884 mn) was up 59% YoY led by 47% NII growth and 33% growth in disbursements. This quarter re-emphasizes the sustainability of CIFC’s business model focusing on:  LCV/ SCV products catering to small road transport operators compared to strategic fleet operators (which are facing asset quality issues); CIFC’s CV market share improved 100 bps to 10.9% in FY13 in despite competition from banks  LAP segment focusing on self-employed professionals  Addition of new product lines like housing loans and small enterprise finance which can be future growth drivers  Adequate provision for stressed assets (Rs 200 mn for stress in Orissa HCV portfolio in Q4FY13) Regards, Praveen Agarwal (Executive Director – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1102 Deepak Agrawal (VP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1133 Namesh Chhangani (AVP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1127

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