Cholamandalam Investment's stock has increased by 9% following their earnings report

Cholamandalam Investment and Finance Company, a firm under the Murugappa Group, experienced a surge of almost 9% in its shares on May 4, driven by its higher-than-expected earnings report. The company's disbursals and collections growth played a significant role in its success.

Cholamandalam Investment and Finance Company has announced a robust performance in Q4FY23, achieving its best-ever disbursals, collections, and profitability figures. Disbursals rose 65 percent YoY to reach Rs 21,020 crore, up from Rs 12,718 crore, and market share increased in both vehicle finance and other business units. The total assets under management grew by 36 percent YoY, from Rs 82,904 crore to Rs 112,782 crore.

The growth rate of vehicle loans was 27 percent, and new business accounted for 9 percent of the total AUM. Elara Securities predicted a 25 percent AUM CAGR in FY23-25, citing macro tailwinds and new growth engines.

Net interest margin remained flat QoQ but yielded better results, offsetting a higher cost of funds of over 10 bps QoQ. The Stage 3 assets ratio decreased by 50 bps QoQ, reaching 3.0 percent, while the Gross Non-Performing Assets ratio based on Income Recognition and Asset Classification fell by 74 bps to 4.6 percent. Credit costs also decreased by 25 bps QoQ.

JP Morgan, following the firm's strong earnings, has upgraded the stock to 'overweight' from 'underweight' and increased its target price to Rs 1,020 per share from Rs 700. Macquarie has rated the stock as 'outperform' and increased its target price to Rs 860 per share. CLSA has rated the stock as 'buy' and raised its price target to Rs 1,070 per share from the current market price.

Meanwhile, Jefferies India has recommended Cholamandalam Investment as its top pick and set a target price of Rs 900 per share.

On the other hand, Elara Securities has downgraded the stock from 'buy' to 'accumulate' and maintained a target price of Rs 930 per share, representing a 5% increase from the current market price.

During the March quarter, the firm reported a standalone net profit of Rs 853 crore, up 24% from Rs 690 crore in the previous year. The standalone revenue from operations also rose by 43% YoY to Rs 3,701 crore from Rs 2,580 crore.