While ICICI Securities has upgraded the stock to “add” from “hold” and has a price target of ₹1,625 per share, Ambit has upgraded it to “buy” from “sell” and has raised its price target to ₹1,722 per share from the previous ₹1,500 apiece.
ICICI Securities sees an 17.7% upside potential, while Ambit’s price target raise has indicated an 24.7% upside potential from the stock’s previous close.
ICICI Securities
The brokerage said the Cholamandalam Invest stock has corrected 16% in the past month compared to a 12% fall in the Nifty Financial Services index.
It said the recent underperformance is largely on concerns about asset quality amid rising oil prices.
Analysis by the brokerage suggests it has emerged as the most resilient vehicle finance player during the past cycles.
Credit costs had declined steadily to 64 basis points by the financial year 2019 from 155 basis points in FY16, ICICI Securities said. That was the period when oil prices had surged to $70 a barrel by financial year 2019 from $48 in financial year 2016.
Ambit
The stock had de-rated 15-20% and underperformed the Nifty Bank and auto NBFC peers by 10% and 29% respectively, over the last 12 months.
According to Ambit, the current valuation of 2.7 times financial year 2028 estimated price-to-book value undermines the time-tested execution prowess of the company.
The brokerage also said that disbursals in the vehicle finance business has bottomed and it has the scope to improve further as auto volumes seen an uptick.
The risk of further disappointment is low given the improving disbursal and non-performing assets (NPA) trends, Ambit said.
As a result, the brokerage has upgraded Chola’s financial year 2028 Earnings Per Share (EPS) estimates and price target by 7% and 15% respectively.
Shares of Cholamandalam Investment and Finance Company ended 3.4% higher on Tuesday at ₹1,427.9. The stock has dropped 18% in the last one month.
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