Motilal Oswal bullish on Cholamandalam Inv, sees 16% upside; here's why

Analysts at brokerage firm Motilal Oswal Financial Services (MOFSL) remain bullish on Cholamandalam Investment and Finance Company (CIFC) and have retained their Buy rating on the scrip, citing that the company is gradually evolving into a more robust and resilient NBFC — one that is less cyclical, more diversified, and increasingly anchored in stable, secured retail and SME income streams.

 

The analysts expect CIFC’s profit after tax (PAT) to grow at a compound annual growth rate (CAGR) of 25 per cent between FY25 and FY28. They project return on assets (RoA) and return on equity (RoE) of 2.7 per cent and 20 per cent, respectively, by FY28. They have reaffirmed their Buy rating with a target price of ₹1,920, which is about 16.35 per cent higher than the stock’s previous close of ₹1,650.10 on the NSE.

 

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 According to Abhijit Tibrewal, Nitin Aggarwal, and Raghav Khemani — Research Analysts at MOFSL — the company’s measured approach of curbing exposure to riskier product lines, while simultaneously expanding newer businesses such as CD and gold loans, underscores its commitment to preserving earnings quality and maintaining balance sheet strength amid a weak macro environment.

 

Cholamandalam Investment, analysts said, is navigating a complex operating environment by reinforcing its core businesses while taking corrective measures in underperforming segments.  ALSO READ| Nifty strategy, 3 stocks to buy today by Chandan Taparia of Motilal Oswal 

 

“A key management priority is improving operational efficiency, with efforts directed toward enhancing productivity and optimizing costs, particularly in its vehicle and home loan businesses,” wrote the analysts in a research note.

 

Further, they highlighted that the company continues to demonstrate resilience through its diversified business model, prudent risk management, and focus on sustainable growth, even as it navigates a dynamic operating environment. The company is actively working to improve asset quality amid a weak macro environment.

 

“Although currently experiencing a soft cyclical patch, CIFC remains a robust franchise, with an expected CAGR of around 20 per cent in AUM and around 25 per cent in PAT over FY25–28, alongside projected RoA/RoE of 2.7 per cent/20 per cent in FY28,” the analysts said.

 

CIFC trades at 3.8x FY27E P/BV, a premium that analysts believe is well-deserved and likely to sustain.

 

“This reflects the company’s consistent focus on navigating vehicle demand cyclicality while sustaining healthy AUM growth and stable asset quality through a well-diversified product mix,” they added.