Morgan Stanley has maintained an equal-weight rating on Cholamandalam Investment and Finance Company Ltd (Chola Finance), assigning a target price of ₹1,475 per share. The stock was trading at ₹1,435.60 at the time of the report.
According to the brokerage, Chola Finance’s asset quality trends showed weakness, with bad loan formation and credit costs coming in higher than estimates. The coverage ratio also weakened, both on a year-on-year and quarter-on-quarter basis, signalling elevated provisioning or risk in the lending book.
Despite these challenges, the company’s net interest income (NII) remained in line with expectations. Importantly, pre-provision operating profit (PPoP) beat estimates, which the firm attributes to strong assignment income and effective cost control measures.
However, Morgan Stanley cautioned that the premium valuation currently enjoyed by the stock could face pressure, and it expects a de-rating in the valuation multiples going forward.
Disclaimer: This article is based on Morgan Stanley’s stock research report. The views and target price mentioned are theirs. This does not constitute a recommendation to buy or sell any stock. Please consult a registered financial advisor before making any investment decisions.
