CHOLAFIN - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 4.1
| Stock Code | CHOLAFIN | Market Cap | 1,33,325 Cr. | Current Price | 1,580 ₹ | High / Low | 1,832 ₹ |
| Stock P/E | 27.5 | Book Value | 307 ₹ | Dividend Yield | 0.13 % | ROCE | 10.3 % |
| ROE | 19.7 % | Face Value | 2.00 ₹ | DMA 50 | 1,681 ₹ | DMA 200 | 1,600 ₹ |
| Chg in FII Hold | -0.29 % | Chg in DII Hold | 0.27 % | PAT Qtr | 1,288 Cr. | PAT Prev Qtr | 1,155 Cr. |
| RSI | 32.9 | MACD | -25.3 | Volume | 7,02,161 | Avg Vol 1Wk | 15,85,155 |
| Low price | 1,239 ₹ | High price | 1,832 ₹ | PEG Ratio | 1.07 | Debt to equity | 7.24 |
| 52w Index | 57.4 % | Qtr Profit Var | 18.5 % | EPS | 57.6 ₹ | Industry PE | 18.9 |
📊 Financials: Cholamandalam Investment & Finance Company Ltd. (CHOLAFIN) has delivered strong profitability with PAT rising to 1,288 Cr from 1,155 Cr, reflecting an 18.5% quarterly profit variation. ROE at 19.7% is robust, while ROCE at 10.3% indicates moderate efficiency. Debt-to-equity ratio of 7.24 highlights high leverage, typical for NBFCs, but manageable given earnings growth. EPS of 57.6 ₹ supports earnings visibility.
💹 Valuation: Current P/E of 27.5 is above the industry average (18.9), suggesting premium valuation. P/B ratio ~5.15 (Price 1,580 ₹ / Book Value 307 ₹) is expensive relative to book value. PEG ratio of 1.07 indicates fair valuation relative to growth. Dividend yield of 0.13% is negligible, offering limited income support. Intrinsic value appears lower than current price, reflecting stretched valuations.
🏢 Business Model: CHOLAFIN operates as a diversified NBFC with focus on vehicle finance, home loans, SME lending, and secured business loans. Competitive advantage lies in strong distribution network, diversified loan book, and backing from the Murugappa Group. Growth is driven by rising credit demand and financial inclusion initiatives.
📈 Entry Zone: Attractive accumulation zone between 1,500–1,550 ₹, closer to DMA200 (1,600 ₹). RSI at 32.9 indicates oversold conditions, while MACD (-25.3) suggests bearish momentum. Long-term investors can accumulate gradually at lower levels.
🔒 Holding Guidance: Fundamentally strong with consistent profit growth and robust ROE. Suitable for long-term holding, though valuations are stretched. Investors should monitor leverage and interest rate cycles closely.
Positive
- Strong ROE (19.7%) ensures shareholder value creation.
- Quarterly PAT growth of 18.5% shows earnings momentum.
- Diversified loan portfolio across vehicle, housing, and SME finance.
- Institutional confidence with DII holdings increase (+0.27%).
Limitation
- High debt-to-equity ratio (7.24) increases leverage risk.
- P/E (27.5) above industry average (18.9), indicating premium valuation.
- P/B ratio of 5.15 suggests expensive valuation relative to book value.
- Dividend yield of 0.13% offers negligible income support.
- FII holdings decreased (-0.29%), showing cautious foreign sentiment.
Company Negative News
- No major negative news reported, but high leverage and stretched valuations raise caution.
Company Positive News
- Strong quarterly profit growth and robust ROE.
- Diversified loan book supports long-term growth.
- Backing from Murugappa Group enhances credibility.
Industry
- NBFC sector benefits from rising credit demand in vehicle and housing finance.
- Industry P/E at 18.9 suggests moderate optimism.
- Government initiatives for financial inclusion support long-term growth.
Conclusion
✅ Cholamandalam Investment & Finance Company Ltd. is financially strong with robust ROE and consistent profit growth. However, valuations are stretched and leverage is high. Long-term investors may accumulate near 1,500–1,550 ₹ for margin of safety, while monitoring interest rate cycles and asset quality.
I can also extend this with a peer comparison against Bajaj Finance and Shriram Finance to highlight how CHOLAFIN stacks up in valuation and efficiency. Would you like me to add that?