CHOLAFIN - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 4.1
| Stock Code | CHOLAFIN | Market Cap | 1,46,649 Cr. | Current Price | 1,739 ₹ | High / Low | 1,832 ₹ |
| Stock P/E | 30.3 | Book Value | 307 ₹ | Dividend Yield | 0.11 % | ROCE | 10.3 % |
| ROE | 19.7 % | Face Value | 2.00 ₹ | DMA 50 | 1,681 ₹ | DMA 200 | 1,603 ₹ |
| Chg in FII Hold | -0.29 % | Chg in DII Hold | 0.27 % | PAT Qtr | 1,288 Cr. | PAT Prev Qtr | 1,155 Cr. |
| RSI | 58.8 | MACD | -12.6 | Volume | 23,92,441 | Avg Vol 1Wk | 21,75,071 |
| Low price | 1,301 ₹ | High price | 1,832 ₹ | PEG Ratio | 1.18 | Debt to equity | 7.24 |
| 52w Index | 82.6 % | Qtr Profit Var | 18.5 % | EPS | 57.6 ₹ | Industry PE | 18.9 |
📊 Analysis: CHOLAFIN trades at a P/E of 30.3, higher than the industry average of 18.9, suggesting premium valuation. Strong ROE (19.7%) highlights efficient capital use, while ROCE (10.3%) is modest. EPS of 57.6 ₹ supports profitability, and PEG ratio of 1.18 indicates fair valuation relative to growth. Dividend yield of 0.11% is negligible. Debt-to-equity at 7.24 is high, typical for NBFCs but worth monitoring. Technicals show price above DMA 50 (1,681 ₹) and DMA 200 (1,603 ₹), with RSI at 58.8 suggesting healthy momentum, though MACD (-12.6) signals short-term weakness. Quarterly PAT growth (1,288 Cr. vs 1,155 Cr.) and profit variation (+18.5%) support earnings strength. Institutional activity is mixed, with FII holdings reduced (-0.29%) and DII holdings increased (+0.27%).
💰 Ideal Entry Zone: Between 1,650 ₹ – 1,700 ₹ (near DMA 50 support and valuation comfort). Current price (1,739 ₹) is slightly above ideal entry, so staggered accumulation is recommended.
📈 Exit / Holding Strategy: For long-term investors already holding, maintain positions given strong ROE and earnings growth. Exit only if price sustains below 1,600 ₹ (DMA 200) or if debt metrics worsen. Holding period: 3–5 years for compounding, with periodic review of leverage and sector performance.
Positive
- Strong ROE (19.7%) indicates efficient capital use
- EPS of 57.6 ₹ supports profitability
- PEG ratio of 1.18 suggests fair valuation relative to growth
- Quarterly PAT growth (+18.5%) shows earnings momentum
- DII holdings increased (+0.27%), reflecting domestic support
Limitation
- P/E of 30.3 is higher than industry average (18.9)
- ROCE (10.3%) is modest compared to ROE
- Dividend yield of 0.11% is negligible
- High debt-to-equity ratio (7.24) increases financial risk
- MACD (-12.6) signals weak short-term momentum
Company Negative News
- FII holdings reduced (-0.29%), showing foreign caution
- High leverage typical of NBFCs remains a structural risk
Company Positive News
- Quarterly PAT improved (1,288 Cr. vs 1,155 Cr.)
- DII holdings increased (+0.27%), reflecting domestic confidence
Industry
- Industry P/E at 18.9 shows CHOLAFIN trades at a premium
- NBFC sector supported by credit expansion and rising demand
Conclusion
✅ CHOLAFIN is a fundamentally strong NBFC with robust ROE and earnings growth, though it trades at a premium and carries high leverage. Ideal entry is near 1,650–1,700 ₹. Long-term holders should maintain positions for 3–5 years, monitoring debt levels and sector performance.